How is the monthly interest rate 'r' calculated for mortgage payments?

The monthly interest rate 'r' is calculated by dividing the yearly percentage rate by 12. This method derives from the basic principle of converting an annual rate into a monthly rate, as there are 12 months in a year. By taking the annual rate and dividing it by 12, you accurately reflect the portion of the annual rate applicable to a single month, which is essential in determining monthly mortgage payments. This conversion is critical for calculating the appropriate amount of interest charged for each month of the mortgage term.

Other methods listed would not yield the correct monthly interest rate. Simply adding or doubling the yearly percentage rate does not take into account the number of months, and multiplying by 100 changes the context altogether, as it would convert a percentage into a decimal or integer form rather than provide the monthly figure needed for calculations.