Question

Franklin has transferred his credit card debt to a low-interest loan. The annual interest rate on the account is 6%. Select the expression that reveals the monthly rate of increase for the loan balance.

A. 1.06/12
B. 0.06^1/2
C. 0.06/12
D. 1.06^12

Answer 1

The monthly rate of increase for Franklin's loan balance with an annual interest rate of 6% is represented by the expression 0.06/12, which equates to a monthly interest rate of 0.5%.

Step-by-step explanation:

The expression that reveals the monthly rate of increase for the loan balance when the annual interest rate is 6% is found by dividing the annual interest rate by the number of months in a year. To convert an annual rate to a monthly rate, you divide by 12 since there are 12 months in a year. Therefore, the correct expression for the monthly interest rate is 0.06/12, which is 0.005 or 0.5% per month.