You take out a cash advance of $1000 on a credit card. After 3 months, you owe $1058.35. The interest is compounded monthly. What is the annual interest rate for this cash advance? (Round to one decimal place.)
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F= P(1+(r/m))^(mn), where m is the number of years and n is the number of interst periods per year, and r = nominal interest rate
what you desire is the effective interst i
thus from info, F=1058.35;P = 1000
thus we have 1058.35 = 1000(1+(r/m))^mn
since its compounded monthly and for only 3 months, n=1 yr and m = 3
so solving for r we obtain: 0.0573
to obtain i use: i = [(1+(r/m))^m]-1 substituting values then solving we get: 0.0584 or 5.84%
had explained in more detail the first time but i hope this is helpful..