A credit card company charges 0.008% interest per day for credit.
Step 2 of 2: What is the annual rate of interest for this credit card? (Use the business year of 360 days per year.)
Write your answer in percent form.
Answer (2)
Convert the daily interest rate to decimal form: 100 0.008 = 0.00008 .
Calculate the annual interest rate: 0.00008 × 360 = 0.0288 .
Convert the annual interest rate back to percentage form: 0.0288 × 100 = 2.88 .
The annual interest rate is 2.88% .
Explanation
Understanding the Problem We are given that a credit card company charges 0.008% interest per day. We need to find the annual interest rate, assuming a business year of 360 days.
Converting Daily Rate to Decimal First, we convert the daily interest rate from a percentage to a decimal by dividing by 100: d ai l y _ r a t e = 100 0.008 = 0.00008
Calculating Annual Rate Next, we calculate the annual interest rate by multiplying the daily interest rate by the number of days in a business year (360 days): ann u a l _ r a t e = d ai l y _ r a t e × 360 = 0.00008 × 360 = 0.0288
Converting Annual Rate to Percentage Finally, we convert the annual interest rate from a decimal back to a percentage by multiplying by 100: ann u a l _ r a t e _ p erce n t = ann u a l _ r a t e × 100 = 0.0288 × 100 = 2.88
Final Answer Therefore, the annual interest rate for this credit card is 2.88%.
Examples
Understanding annual interest rates is crucial in personal finance. For example, if you borrow $10,000 on this credit card, you would owe $288 in interest over the year, assuming no payments are made. Knowing how interest is calculated helps you make informed decisions about borrowing and saving. This concept applies to loans, mortgages, and investments, allowing you to compare different financial products and understand the true cost or return.
The annual interest rate for a credit card charging 0.008% per day is 2.88%. This is calculated by converting the daily rate to decimal, estimating the annual rate over 360 days, and then converting it back to percentage form. Thus, the annual rate reflects the total interest one would incur over a year at that daily rate.
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