8. Suppose your Master Card Charges an APR of 16.5%. Your previous statement showed a balance of $600, you made a payment of $200. You then bought $350 worth of electronics, which you charged on your Master Card. Let’s make a spreadsheet a. Suppose in the second month you make a payment of $250 and then go make purchases of $460. Complete the second month of the spreadsheet. b. Suppose in the third month you make a payment of $175 and then make purchases of $55 and $120. Complete the third month of the spreadsheet
To complete the spreadsheet for the second month, and then the third month, we need to calculate the new balance and the interest charges for each month. Here is a step-by-step breakdown:
1. Begin by entering the starting information in the spreadsheet for month 1. Here is the initial balance, payment, and purchase:
- Initial Balance: $600
- Payment: $200
- Purchase: $350
2. Calculate the new balance for month 2 by subtracting the payment and adding the purchase to the previous month's balance:
- New Balance = (Previous Balance - Payment) + Purchase
- Month 1 New Balance = ($600 - $200) + $350 = $750
3. Calculate the interest charged for month 2 by multiplying the new balance by the APR (16.5%) and dividing by 12 (assuming monthly compounding):
- Interest Charged = (New Balance * APR) / 12
- Month 2 Interest Charged = ($750 * 16.5%) / 12 = $10.31
4. Calculate the total amount due for month 2 by adding the new balance and the interest charged:
- Total Amount Due = New Balance + Interest Charged
- Month 2 Total Amount Due = $750 + $10.31 = $760.31
5. Apply the payment made in month 2:
- New Balance = Total Amount Due - Payment
- Month 2 New Balance = $760.31 - $250 = $510.31
6. Add the purchase made in month 2:
- New Balance = Month 2 New Balance + Purchase
- Month 2 New Balance = $510.31 + $460 = $970.31
7. Calculate the interest charged for month 3 using the same method as step 3:
- Month 3 Interest Charged = ($970.31 * 16.5%) / 12 = $13.37
8. Calculate the total amount due for month 3 by adding the new balance and the interest charged:
- Month 3 Total Amount Due = $970.31 + $13.37 = $983.68
9. Apply the payment made in month 3:
- Month 3 New Balance = $983.68 - $175 = $808.68
10. Add the purchases made in month 3:
- Month 3 New Balance = $808.68 + $55 + $120 = $983.68
Now you have completed the second and third months of the spreadsheet.
To complete the second and third months of the spreadsheet, we need to understand how credit card interest and payments work. Here's a step-by-step guide to filling out the spreadsheet:
1. Starting balance:
- In the second month, your starting balance is the remaining balance from the first month, which is $600.
- In the third month, your starting balance is the remaining balance from the second month.
2. Interest calculation:
- To calculate the interest for each month, multiply the starting balance by the annual percentage rate (APR) and divide it by 12 months.
- For example, in the second month, the interest is ($600 * 16.5%) / 12.
3. Payment:
- Subtract the payment amount from the starting balance to get the new balance.
- For example, in the second month, subtract $250 from the starting balance.
4. Purchase:
- Add the purchase amount to the new balance to get the updated balance.
- For example, in the second month, add $460 to the new balance.
5. Repeat steps 2-4 for each month.
Now let's fill out the second month of the spreadsheet:
| Month | Starting Balance | Interest | Payment | Purchase | New Balance |
|--------|-----------------|----------|---------|----------|-------------|
| Month 1| $600 | - | - | - | $600 |
| Month 2| $600 | ($600*16.5%/12) | $250 | $460 | $810 |
To complete the third month, we start with the ending balance from the second month as the starting balance. Let's move on to the third month:
| Month | Starting Balance | Interest | Payment | Purchase | New Balance |
|--------|-----------------|----------|---------|----------|-------------|
| Month 1| $600 | - | - | - | $600 |
| Month 2| $810 | ($810*16.5%/12) | $175 | $175+$120 | $955 |
| Month 3| $955 | ($955*16.5%/12) | $- | $55 | $1,011 |
Note: The interest is calculated on the starting balance of each month, and the payment reduces the new balance. The interest is not included in the new balance calculation.
You can continue this process month by month as necessary. Make sure to adjust the interest rate, payment amounts, and purchase amounts accordingly.