Question

Travis just got a new credit card that offers inductors APRof 3.6% for first 3 months and standard APR of 14.4% thereafter. If interest is compounded monthly, what is the periodic interest rate during the first three months?

Answer 1

Answer:

Month 1 : 0.002988

Month 2: 0.00299692814

Month 3: 0.00300588297

Step-by-step explanation:

Since we're only finding the interest for the first three months, it's easy to do it by performing the simple interest formula. But first, we need divide 3 by 12, since we calculate interest using years. 3/12 = 1/4 = 0.25

The standard simple interest calculation is done by multiplying the starting amount, by the interest, by the time, then dividing by 100 to put it into a percentage.

1 month = 1/12 or approximately 0.083 of the year.

Let's say P = 1. For the first month, it will be 1 x 3.6 x 0.083 = 0.2988 / 100

The second month, (1 + 0.002988) * 3.6 * 0.083 = 0.299692814 / 100

The third month, (1.002988 + 0.00299692814) x 3.6 x 0.083 = 0.300588297/100

Given the initial amount be 1, those would be the periodic interest rate during the first three months.