Question

Your credit card company charges you 1.45 percent per month. what is the annual percentage rate on your account? 16.67 percent 16.79 percent 17.40 percent 18.00 percent 18.86 percent

Answer 1

Let x = the principal amount.

Value after 1 month = x(1 + 0.0145) = x*1.0145
Value after 2 months = x*1.1045²
...
Value after 12 months = x*1.1045¹² = 1.1886x

Interest paid = 1.1886x - x = 0.1886x
Annual percent interest = 100*(0.1886x/x) = 18.86%

Answer: 18.86%