Jason’s credit card’s beginning unpaid balance for August is $2,000. During the August billing cycle he made a payment of $200 and used card to purchase $50 worth of grocery. Credit card charges 24% annual percentage rate and uses the unpaid balance method.
a. What is the finance charge at the end of August? (5 Points)
Answer:
b. What is the new balance at the end of August? (5 Points)
Answer:
a. The unpaid balance is $1800. On e month's interest on that is 2%, or $36. That is the finance charge in this case.
b. Unpaid balance + finance charge + new purchases = 1800 + 36 + 50 = ?
a. To calculate the finance charge, we need to find the average daily balance for the billing cycle and then apply the annual percentage rate (APR).
First, let's calculate the average daily balance. We know that the beginning unpaid balance is $2,000 and Jason made a payment of $200. So the remaining balance is $2,000 - $200 = $1,800.
Since it's not mentioned how many days were in the billing cycle for August, let's assume it had 30 days.
Average daily balance = (Unpaid balance * Number of days) / Total days
Average daily balance = ($1,800 * 30) / 30
Average daily balance = $1,800
Now, we can calculate the finance charge using the formula:
Finance charge = Average daily balance * (APR / 365) * Number of days
Given that the APR is 24%, we need to convert it into a daily rate by dividing it by 365. So, the daily rate is 0.24 / 365.
Finance charge = $1,800 * (0.24 / 365) * 30
Finance charge ≈ $2.96
Therefore, the finance charge at the end of August is approximately $2.96.
b. To calculate the new balance at the end of August, we need to consider the previous balance, any new charges, and any payments made.
Previous balance = $1,800
New charges = $50
Payments = $200
New balance = Previous balance + New charges - Payments
New balance = $1,800 + $50 - $200
New balance = $1,650
Therefore, the new balance at the end of August is $1,650.