Question

The average dally balance for Dave's last credit card statement was $1,213.44, and he had to pay a finance charge. The APR is 20.4%. What is the monthly interest rate?

Answer 1

To determine the monthly interest rate from the APR of 20.4%, divide the APR by 12. Dave's monthly interest rate is 1.7%.

Step-by-step explanation:

The question asks to calculate the monthly interest rate based on Dave's average daily balance on his credit card and the annual percentage rate (APR). The APR provided is 20.4%. To find the monthly interest rate, we divide the APR by 12 months. Therefore, the monthly interest rate is the APR divided by 12.

Monthly Interest Rate = APR / 12

Monthly Interest Rate = 20.4% / 12

Monthly Interest Rate = 1.7%

The interest rate charged on credit cards is one of the main ways credit card companies earn revenue. Knowledge of interest rates is critical for managing personal finances, as carrying a balance can lead to significant finance charges.