Question

a credit card issuer charges an APR of 19.66%, and its billing cycle is 30 days long. what is its periodic interest rate?

21.72%
1.22%
1.62%
21.53%

Answer 1

To find the periodic interest rate, you can use the following formula:

\[
\text{Periodic Interest Rate} = \frac{\text{APR}}{n}
\]

where \( n \) is the number of billing periods in a year. For a monthly billing cycle, \( n \) would be 12.

Given that the APR is 19.66%, let's convert that to a decimal for the calculation:

\[
\text{APR} = 19.66\% = 0.1966
\]

Now, we can calculate the periodic interest rate:

\[
\text{Periodic Interest Rate} = \frac{0.1966}{12}
\]

Calculating this gives:

\[
\text{Periodic Interest Rate} \approx 0.0163833
\]

To convert this back into a percentage, we multiply by 100:

\[
\text{Periodic Interest Rate} \approx 1.63833\%
\]

Rounding to two decimal places, the periodic interest rate is approximately **1.64%**. However, from the given options, the closest value is:

**1.62%**.