How much interest does a $1,000 note accumulate in one month at an 8% annual interest rate?

How much interest does a $1,000 note accumulate in one month at an 8% annual interest rate?

• A. $6.67
• B. $8.00
• C. $80.00
• D. $16.67

Answer: (A)

To determine how much interest a $1,000 note accumulates in one month at an 8% annual interest rate, it's important to convert the annual rate into a monthly rate. First, the annual interest rate of 8% needs to be converted to a decimal for calculation purposes. This is done by dividing 8 by 100, which gives 0.08. Then, to find the monthly interest rate, divide this annual rate by 12 (the number of months in a year): \[ \text{Monthly Interest Rate} = \frac{0.08}{12} = 0.0066667 \text{ (approximately)} \] Next, to find the amount of interest accumulated in one month, multiply the principal amount ($1,000) by the monthly interest rate: \[ \text{Interest} = 1,000 \times 0.0066667 \approx 6.67 \] This calculation shows that a $1,000 note at an 8% annual interest rate accumulates approximately $6.67 in interest over one month. This understanding reflects the basic principles of interest calculation, emphasizing the importance of converting annual rates into an applicable form for short-term calculations,

To determine how much interest a $1,000 note accumulates in one month at an 8% annual interest rate, it's important to convert the annual rate into a monthly rate.

First, the annual interest rate of 8% needs to be converted to a decimal for calculation purposes. This is done by dividing 8 by 100, which gives 0.08. Then, to find the monthly interest rate, divide this annual rate by 12 (the number of months in a year):

[

\text{Monthly Interest Rate} = \frac{0.08}{12} = 0.0066667 \text{ (approximately)}

]

Next, to find the amount of interest accumulated in one month, multiply the principal amount ($1,000) by the monthly interest rate:

[

\text{Interest} = 1,000 \times 0.0066667 \approx 6.67

]

This calculation shows that a $1,000 note at an 8% annual interest rate accumulates approximately $6.67 in interest over one month. This understanding reflects the basic principles of interest calculation, emphasizing the importance of converting annual rates into an applicable form for short-term calculations,