Question 12.12. Katie had an unpaid balance of $1,734.50 on her credit card statement at the beginning of January. She made a payment of $165.00 during the month. If the interest rate on Katie's credit card was 7% per month on the unpaid balance, find the finance charge and the new balance on February 1.
7% per month ????
in the middle ages , they would burn folks on the stake for rates like that. It was called usury.
anyway ....
interest on balance = .07(1734.50) = $121.42
actual repayment from loan
= 165-121.42 = $43.59
Balance next month = 1734.50 - 43.59
= $ 1690.92
To find the finance charge and the new balance on February 1, we need to follow these steps:
Step 1: Calculate the monthly interest rate.
Since the interest rate is given as 7% per month, we convert it to a decimal by dividing it by 100: 7/100 = 0.07.
Step 2: Calculate the finance charge for January.
To find the finance charge, we multiply the unpaid balance by the monthly interest rate: $1,734.50 * 0.07 = $121.42.
Step 3: Calculate the new balance on February 1.
The new balance is the sum of the unpaid balance, payment, and finance charge: $1,734.50 + $165.00 + $121.42 = $2,020.92.
Therefore, the finance charge is $121.42 and the new balance on February 1 is $2,020.92.