Question

if the annual interest rate is 12%, what is the monthly interest rate? (1 point) 1% 1.2% 12% 144%

Explanation:

Step1: Recall the relationship between annual and monthly rates

To find the monthly interest rate, we divide the annual interest rate by the number of months in a year (12), since the annual rate is the total rate over 12 months.
The formula is: \(\text{Monthly Rate} = \frac{\text{Annual Rate}}{12}\)

Step2: Substitute the given annual rate

Given the annual interest rate is \(12\%\), we substitute into the formula:
\(\text{Monthly Rate} = \frac{12\%}{12}\)

Step3: Perform the division

\(\frac{12\%}{12}= 1\%\)

Answer:

1% (corresponding to the option "1%")