Question

Question 1
You have just purchased a home by borrowing
$
400
,
000
$400,000 for 30-years at a fixed APR of
3.87
%
3.87%. The loan payments are monthly and interest is compounded monthly.

What is the periodic interest rate? (I.e., what is the monthly interest rate?)


0.0129
0.0129



0.0013
0.0013



0.0394
0.0394



0.0032
0.0032

Answer 1

To find the periodic interest rate, or monthly interest rate, we need to convert the annual percentage rate (APR) into a monthly rate. The APR is given as 3.87%.

1. First, convert the percentage rate to a decimal:
\[
\text{APR} = 3.87\% = \frac{3.87}{100} = 0.0387
\]

2. Next, divide the annual rate by the number of months in a year (12) to find the monthly interest rate:
\[
\text{Monthly Interest Rate} = \frac{0.0387}{12} \approx 0.003225
\]

3. To express this in percentage terms, you can multiply by 100:
\[
0.003225 \times 100 \approx 0.3225\%
\]

So, the monthly interest rate as a decimal is approximately **0.003225**.

Thus, rounding it off more appropriately, the answer is:
\[
\mathbf{0.0032}
\]

Therefore, the correct choice from the options is:
**0.0032**