Question

Gretchen just got a new credit card that offers an introductory APR of 4.8% for the first 4 months and a standard APR of 15.6% thereafter. If interest is compounded monthly, what is the periodic interest rate during the first 4 months?

A. 0.4%
B. 0.3%
C. 1.2%
D. 1.6%

Answer 1

A is correct here

Explanation:

Answer 2

We have this formula APR = (Periodic Rate) × (Number of Periods) to get the APR and since it's annual, the number of periods is 12. The question asked about the periodic rate for the first 4 months so relatively, 15.6 is not included in our solution.

We then substitute the known values to the equation to get

4.8 = (Periodic Rate) × (12)
Periodic Rate then is 0.4 which the answer is letter A: 0.4%.