Question

kari withdrew $50 cash from an out of network atm. she was charged a $5 transaction fee for a total withdrawal from her account. fees can be considered interest for this transaction. what is the estimated annual interest rate for this transaction? remember this charge only represents one month to estimate the apr for the year multiply by 12.

Explanation:

Step1: Calculate monthly interest rate

The principal amount (P) is $50, and the interest (I) for one month is $5. The formula for simple interest rate per period is $r = \frac{I}{P}$. So, $r=\frac{5}{50}=0.1$ or 10% per month.

Step2: Calculate annual interest rate (APR)

Since the monthly rate is 10% and we multiply by 12 to get the annual rate, APR = $0.1\times12 = 1.2$ or 120%.

Answer:

120%