Task 2: Interest in Finance
Interest is a concept familiar to most people: every credit card in existence has a term called annual percentage rate (APR), which is an interest rate. Suppose you charged $1,000 to a credit card that has a minimum payment each month equal to the interest owed. Can you figure out how much the interest rate is based on this amount?

The formula for simple interest is where I is the amount you will pay in interest, r is the rate at which interest will accrue, P is the principal (amount borrowed), and m is the number of times the interest is applied.


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To solve for the interest rate of your credit card, you need to understand which variables in the above formula you have. If your minimum monthly payment is $22 on the $1,000 credit card bill, which variables do you know the values of?

Type your response here: rate= interest/$1000


Manipulate the formula so it will calculate the interest rate you are paying instead of the amount of money you are paying.

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Now that you have a formula that will give you the interest rate, plug in the values for the problem and solve for that interest rate. Interest rates are usually represented for a time period: over what time period does this rate apply? What would the interest rate be if it were a yearly rate?

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Now consider a different situation. Payday loans are a type of loan where you can get money for a future paycheck, typically two weeks in advance. A typical payday loan service might charge $15 for a loan against a paycheck you will receive in two weeks. The interest rate is 10% of the paycheck over that two-week period. Given this information, which variables in the interest formula are known? Develop a formula that will solve for the unknown variable.

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Solve for the value of the unknown variable.

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