Question

Find the monthly interest payment in the situation described below. Assume that the monthly interest rate is 1/ 12of the annual interest rate.

You maintain an average balance of ​$ 1275 on your credit​ card, which carries ​% 12 annual interest rate.

Answer 1

The monthly interest payment is $0.425, or approximately 43 cents.

Explanation:

To find the monthly interest payment, we can use the following formula:

Monthly interest payment = (Average daily balance) x (Monthly interest rate)

The average daily balance can be estimated by assuming that it is equal to the average monthly balance. So, in this case, the average daily balance is:

Average daily balance = (Average monthly balance) / Number of days in the month

Assuming that there are 30 days in the month, we have:

Average daily balance = $1275 / 30 = $42.50

The monthly interest rate is equal to 1/12 of the annual interest rate, which is 12%. So, the monthly interest rate is:

Monthly interest rate = (1/12) x 12% = 1%

Now, we can use these values to calculate the monthly interest payment:

Monthly interest payment = $42.50 x 1% = $0.425

Therefore, the monthly interest payment is $0.425, or approximately 43 cents.