Question

Question 10 (5 points)
Harry had an unpaid balance of $1744.00 on his credit card statement at the
beginning of June. He made a payment of $375.00 during the month. If the interest
rate on Harry's credit card was 15.5% per month on the unpaid balance, find the
finance charge and the new balance on July 1.

Answer 1

We first fill out the table with the information we are given:

Previous balance= $1744

Payments= $375

Now,

we need to compute the finance charge.

We are given an APR of 15.5%, converting this into a decimal which is 0.155.

Hence,

$finance \: charges \: = \\ \frac{APR}{12} \times (Previous \: balance–Payments+Purchases)$

$finance \: charges \: = \\ \frac{0.155}{12} \times (1744 - 375 + 0)$

$finance \: charges \: = 0.012 \times 1369$

$finance \: charges \: = 16.428$

Now,

finance charges = $16.428

To compute the new balance on July 1, we have -

New Balance =

(Previous balance – Payments + Purchases + Finance Charge)

New Balance = $1744 - $375 + $0 + $16.428

= $1385.428

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