Interest in Finance
Interest is a concept familiar to most people: every credit card in existence has a term called annual percentage rate (APR), which is an interest rate. Suppose you charged $1,000 to a credit card that has a minimum payment each month equal to the interest owed. Can you figure out how much the interest rate is based on this amount?
The formula for simple interest is I=rpm where I is the amount you will pay in interest, r is the rate at which interest will accrue, P is the principal (amount borrowed), and m is the number of times the interest is applied.
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a. To solve for the interest rate of your credit card, you need to understand which variables in the above formula you have. If your minimum monthly payment is $22 on the $1,000 credit card bill, which variables do you know the values of?