It’s time to go shopping! You grab your Best Purchase credit card, which has an annual interest rate of 18%. The unpaid balance on your card for the current billing cycle is $285.76. On your shopping trip, you purchase four items: a Blu-ray player, two 4-GB flash drives, and a 19-inch flat-screen television. You purchase all the items with your credit card for a total of $352.18. When the bill comes at the end of the month, you decide to pay the entire total balance.
1. What is the monthly interest rate on the card?
2. What are the interest charges on the card? (Calculate only on last month’s unpaid balance.)
3. What is the total balance on your card?
(Round all your answers to the nearest hundredth or cent.)
1. The monthly interest rate on the card is 1.5% (18% divided by 12 months).
2. The interest charges on the card would be $4.29 (1.5% of $285.76).
3. The total balance on your card would be $636.23 ($285.76 + $352.18 + $4.29).
1. To calculate the monthly interest rate on the card, we need to divide the annual interest rate by 12 (for the 12 months in a year).
Annual Interest Rate: 18%
Monthly Interest Rate = 18% / 12 = 1.5%
So, the monthly interest rate on the card is 1.5%.
2. To calculate the interest charges on the card, we need to multiply the unpaid balance by the monthly interest rate.
Unpaid Balance: $285.76
Monthly Interest Rate: 1.5%
Interest Charges = Unpaid Balance * Monthly Interest Rate
Interest Charges = $285.76 * 1.5% (or 0.015)
Calculating this, the interest charges on the card amount to $4.29.
3. To calculate the total balance on your card, we need to add the unpaid balance and the interest charges to the total amount spent on the shopping trip.
Unpaid Balance: $285.76
Interest Charges: $4.29
Total Amount Spent: $352.18
Total Balance = Unpaid Balance + Interest Charges + Total Amount Spent
Total Balance = $285.76 + $4.29 + $352.18
Calculating this, the total balance on your card is $642.23.