The monthly interest rate when the annual interest rate (APR) is compounded monthly is calculated by dividing the annual interest rate by 12. If the annual interest rate is given as rrr (in decimal form), then the monthly interest rate is r12\frac{r}{12}12r. For example, if the APR is 1 (which means 100%), the monthly interest rate would be:
\text{Monthly interest rate}=\frac{1}{12}=0.0833\text{ (or 8.33% per month)}
This formula comes from the fact that compounding monthly means the annual rate is spread evenly across 12 months, and interest is applied each month accordingly.
