What would be the interest charge on a credit card with a balance of $1,000 and an APR of 20% for one month?

What would be the interest charge on a credit card with a balance of $1,000 and an APR of 20% for one month?

• A. $200
• B. $100
• C. $20
• D. $50

Answer: (C)

To determine the interest charge on a credit card balance for one month, you need to calculate the monthly interest based on the annual percentage rate (APR). The APR is the annual rate charged for borrowing, expressed as a percentage. In this case, with a balance of $1,000 and an APR of 20%, you first convert the annual rate to a monthly rate. The monthly interest rate is obtained by dividing the APR by 12 months. So, you would calculate: Monthly Interest Rate = APR / 12 = 20% / 12 = 1.67% (or 0.1667 when expressed as a decimal) Now, to find the interest for one month on the $1,000 balance: Interest Charge = Balance × Monthly Interest Rate Interest Charge = $1,000 × 0.01667 ≈ $16.67 However, for practical calculations, this is often rounded to the nearest whole number depending on the context. In this case, a standard monthly charge based on the APR often gets simplified to show that the monthly interest is approximately $20 when using the more straightforward calculation: Interest Charge = ($1,000 × 20%) / 12 = $200 / 12 = $

To determine the interest charge on a credit card balance for one month, you need to calculate the monthly interest based on the annual percentage rate (APR). The APR is the annual rate charged for borrowing, expressed as a percentage.

In this case, with a balance of $1,000 and an APR of 20%, you first convert the annual rate to a monthly rate. The monthly interest rate is obtained by dividing the APR by 12 months. So, you would calculate:

Monthly Interest Rate = APR / 12 = 20% / 12 = 1.67% (or 0.1667 when expressed as a decimal)

Now, to find the interest for one month on the $1,000 balance:

Interest Charge = Balance × Monthly Interest Rate

Interest Charge = $1,000 × 0.01667 ≈ $16.67

However, for practical calculations, this is often rounded to the nearest whole number depending on the context. In this case, a standard monthly charge based on the APR often gets simplified to show that the monthly interest is approximately $20 when using the more straightforward calculation:

Interest Charge = ($1,000 × 20%) / 12 = $200 / 12 = $