The formula for simple interest is 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.
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?
Suppose you purchase a plasma screen television for $1100.00 with a First Premier credit card that has 79.9% APR. Assuming simple interest and no monthly payments, how much interest will you owe at the end of 12 months? What will the total cost of the television be?
To solve for the interest rate of your credit card, we need to understand which variables in the simple interest formula we have.
The formula for simple interest is:
I = P * r * m
In this case, the interest amount (I) is not given, and we are trying to solve for the interest rate (r). We are told that the principal (P) is $1,000, but we don't have the number of times interest is applied (m).
However, if we know the minimum monthly payment of $22, we can make an assumption about the number of times interest is applied. Typically, credit card interest is applied monthly. So, we can assume that m is 12 (12 months in a year).
Now we have:
P = $1,000
m = 12
We can rewrite the formula as:
I = P * r * m
Since I is not given, we will solve for r.
Dividing both sides of the equation by (P * m), we get:
I / (P * m) = r
Now we can plug in the values we have:
r = I / (P * m)
r = unknown / ($1,000 * 12)
Since the interest amount (I) is not given, we can't calculate the exact interest rate. To solve for the interest rate, we need to know the interest amount or have additional information about the credit card such as the APR (Annual Percentage Rate) or the total amount repaid over a specific period.
Therefore, without further information, we can't determine the interest rate for the credit card.