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Dinah just got a new credit card that offers an introductory APR of 7.2% for the first 3 months and a standard APR of 19.2% thereafter. If interest is compounded monthly, what is the periodic interest rate during the first 3 months?
A. 1.6%
B. 2.4%
C. 0.6%
D. 0.8%
To find the periodic interest rate, we need to convert the annual percentage rate (APR) into a monthly rate. The formula to calculate the monthly interest rate from the APR is:
[
text{Monthly Interest Rate} = frac{text{APR}}{12}
]
For the introductory APR of 7.2%, the calculation is:
[
text{Monthly Interest Rate} = frac{7.2%}{12} = 0.6%
]
Therefore, the periodic interest rate during the first 3 months is 0.6%.
The correct answer is C. 0.6%.