Monthly Compounding

[Poch213]

Hi Guys,
I have come across a confusing understanding of the questions. See below as an example. The questions will state an interest rate however I have to divide by 12 to get the answer for the monthly interest rate. The question already says compounded monthly so why am I having to divide this by 12 even though surely it takes it into account in the question?
A person borrows $z amount with repayment of 40 years with payments made monthly. With an interest rate of x%, COMPOUNDED MONTHLY. Please solve.

 

[S2000magician]

Interest rates are always – always! – quoted as annual rates.
If you want a monthly rate, you divide the annual rate by 12.

 

[Poch213]

S2000magician wrote:
Interest rates are always – always! – quoted as annual rates.
If you want a monthly rate, you divide the annual rate by 12.

Thanks S2000magician

 

[S2000magician]

You’re welcome.