Which formula would you use to calculate monthly interest from annual interest?

To calculate monthly interest from annual interest, you need to divide the annual interest amount by the number of months in a year, which is 12. This approach provides the interest amount that accrues each month, allowing for straightforward financial planning and budgeting.

Using the annual interest amount and dividing by 12 gives you the precise monthly interest amount without any additional calculations or adjustments. This is the standard method for determining monthly interest, as interest is often expressed on an annual basis but is frequently paid or distributed monthly.

Other options, such as dividing by 365, multiplying by 12, or adding 12, do not yield the correct monthly interest figure. Dividing by 365 might represent a daily interest calculation, while multiplying by 12 or adding 12 would incorrectly manipulate the annual interest figure and produce nonsensical results in the context of calculating monthly interest. Hence, the division by 12 is the only logical and correct method for determining monthly interest from an annual rate.