Question

Delilah opens a credit card with an APR of 24.38% compounded monthly. How much is charged in interest this month if her balance is $550?

$134.09

$45.83

$24.38

$11.17

Answer 1

Weegy: $24.38

Answer 2

The interest is going to be the balance * 1/12 of the APR (expressed as a decimal). We divide the interest rate by 12 because we are doing 1 month, which is 1/12 of 1 year (the period over which the interest rate is quoted). The compounding is a red herring here as we only have one period.

@sharun's answer is incorrect. In general, you should be distrustful of anyone on OpenStudy who gives you an answer without demonstrating how it was determined. Also, realize that problem authors like to put in answers which are a trap to snare those who don't understand the material. If a number that appears in your problem is also an answer choice, be very suspicious!

As a sanity check in this case, figure out how much interest would be charged if we were doing simple interest for 1 year — 24.38% * $550 = $134. If interest for an entire year is $134, what is the approximate interest cost for 1 month, or 1/12 of a year?