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17 December, 19:03

Q 6.3: Mia received a credit card offer in the mail. The credit card has an annual percentage rate of 26%. What is the approximate monthly interest rate that will apply to any unpaid balances on this credit card? Assume 12 equal months. A : 4.1%. B : 26.0%. C : 13.0%. D : 2.17%.

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  1. 17 December, 19:10
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    D : 2.17%.

    Explanation:

    The 26% is an APR (Annual Percentage Rate). This is a quoted rate that a credit card company charges. It is also known as the nominal rate.

    Since the question is asking for a monthly rate, use the 26% and convert it into monthly rate. We have 12 months in a year; meaning, we will divide the nominal rate by 12;

    Monthly rate = APR / n

    APR = 26% or 0.26 as a decimal

    n = compounding periods = 12

    therefore, Monthly rate = 26% / 12 = 2.17%
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Home » Business » Q 6.3: Mia received a credit card offer in the mail. The credit card has an annual percentage rate of 26%. What is the approximate monthly interest rate that will apply to any unpaid balances on this credit card? Assume 12 equal months. A : 4.1%.
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