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. I got 1679.33 but that is not one of the possible answers
It sounds like you subtracted the $165 payment and then took 7% of the reduced balance.
However, what probably happens is that on the January statement, there was a finance charge of 7% on the $1734.50 unpaid, or $121.42
So, her $165 payment included $121.42 of interest, and only $43.58 of principal.
So, her balance on the next statement is $1690.92
that better?
To find the finance charge and the new balance on February 1, we need to follow a few steps:
Step 1: Calculate the finance charge
The finance charge is the interest on the unpaid balance. The interest rate is 7% per month. To find the finance charge for January, we need to multiply the unpaid balance by the interest rate.
Finance charge = Unpaid balance * Interest rate
= $1,734.50 * (7% / 100)
= $121.42
Step 2: Calculate the new balance
The new balance is the sum of the unpaid balance, the finance charge, and any payments made during the month.
New balance = Unpaid balance + Finance charge - Payment
= $1,734.50 + $121.42 - $165.00
= $1,691.92
Therefore, the finance charge for January is $121.42, and the new balance on February 1st is $1,691.92.
It seems that the answer you obtained, 1679.33, may have resulted from not subtracting the payment made during the month. Make sure to double-check your calculations.