Aaron had an unpaid balance of $1,177.79 on his credit card statement at the beginning of April. He made a payment of $430.00 during the month, and made purchases of $366.02. If the interest rate on Aaron's credit card was 4.5% per month on the unpaid balance, find his finance charge and the new balance on May 1.
Finance charge = $52.21; new balance = $1,166.02
Finance charge = $56.11; new balance = $1,169.92
Finance charge = $53.00; new balance = $1,166.81
Finance charge = $55.32; new balance = $1,169.13
To find the finance charge and new balance on May 1, we need to follow these steps:
1. Calculate the finance charge:
- The finance charge is calculated by multiplying the unpaid balance by the interest rate. In this case, the unpaid balance is $1,177.79 and the interest rate is 4.5%.
- Convert the interest rate from a yearly rate to a monthly rate by dividing it by 12. So the monthly interest rate is 4.5% divided by 12, which is 0.375% or 0.00375 as a decimal.
- Multiply the unpaid balance by the monthly interest rate to get the finance charge. So, finance charge = $1,177.79 * 0.00375.
2. Calculate the new balance:
- The new balance is the sum of the unpaid balance, the purchases made, and the payment made during the month. In this case, the unpaid balance is $1,177.79, the purchases made are $366.02, and the payment made is $430.00.
- Subtract the payment and purchases from the unpaid balance to get the new balance. So, new balance = $1,177.79 - $430.00 + $366.02.
Now, let's calculate the finance charge and new balance based on the above calculations:
Finance charge = $1,177.79 * 0.00375
New balance = $1,177.79 - $430.00 + $366.02
After evaluating these equations, we find that the correct answer is:
Finance charge = $55.32
New balance = $1,169.13
Therefore, the correct option is:
Finance charge = $55.32; new balance = $1,169.13