If a store credit account charges 1.5% interest each

month, what is the APR?

month, what is the APR?

The APR is the annual percentage rate

therefore the APR is 1.5x12=18%

If the monthly interest is 1.5%, then the APR is

100 [ (1.015)¹² - 1 ] = **19.56 %**

You might think that it would be (12 x 1.5) = 18%, but it’s not.

The interest is compounded. That means interest is added this month,

and then it becomes part of the amount on which interest is charged

next month.

So you’re charged interest on interest, and it adds up.

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