The annual interest rate of paul's savings account is 7.2%,and simple interest is calculated monthly. what is the periodic interest rate of paul's account? a. 0.9% b. 0.6% c. 0.4% d. 1.8%

ANSWER: Option B) 0.6%

EXPLANATION: The Periodic Interest Rate is the interest rate charged on a loan over a specific period of time. Frequently, the banks or lenders quote annual interest rate but charge the interest on a periodic basis. So, the periodic interest rate is the annual interest rate divided by the number of compounding periods.

For Paul, the annual interest rate is 7.2% which is calculated every month i.e. 12 months,

So, 7.2% ÷ 12 months = 0.6%

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