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6 April, 05:51

Gretchen just got a new credit card that offers an introductory APR of 4.8% for the first 4 months and a standard APR of 15.6% thereafter. If interest is compounded monthly, what is the periodic interest rate during the first 4 months?

A. 0.4%

B. 0.3%

C. 1.2%

D. 1.6%

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Answers (1)
  1. 6 April, 06:37
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    We have this formula APR = (Periodic Rate) * (Number of Periods) to get the APR and since it's annual, the number of periods is 12. The question asked about the periodic rate for the first 4 months so relatively, 15.6 is not included in our solution.

    We then substitute the known values to the equation to get

    4.8 = (Periodic Rate) * (12)

    Periodic Rate then is 0.4 which the answer is letter A: 0.4%.
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