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9 December, 08:37

If a store credit account charges 1.5% interest each

month, what is the APR?

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Answers (1)
  1. 9 December, 08:46
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    If the monthly interest is 1.5%, then the APR is

    100 [ (1.015) ¹² - 1 ] = 19.56 %

    You might think that it would be (12 x 1.5) = 18%, but it's not.

    The interest is compounded. That means interest is added this month,

    and then it becomes part of the amount on which interest is charged

    next month.

    So you're charged interest on interest, and it adds up.
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