Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Your credit card company charges you 1.15\% interest per month. What is the annual percentage rate (APR)?

13.8\%

14.5\%

15.3\%

12.0\%

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Verified step by step guidance

Understand the problem: The credit card company charges 1.15% interest per month. To calculate the Annual Percentage Rate (APR), we need to determine the equivalent annual interest rate based on the monthly rate.

Recall the formula for converting a monthly interest rate to an annual interest rate: \( \text{APR} = (1 + \text{Monthly Rate})^{12} - 1 \). This formula accounts for compounding interest over 12 months.

Substitute the given monthly interest rate (1.15%) into the formula. First, convert the percentage to a decimal: \( \text{Monthly Rate} = 1.15\% = 0.0115 \).

Apply the formula: \( \text{APR} = (1 + 0.0115)^{12} - 1 \). This step involves raising \( 1 + 0.0115 \) to the power of 12 and then subtracting 1.

Convert the result back to a percentage by multiplying by 100. This will give you the APR as a percentage, which you can compare to the provided options to select the correct answer.