Question

Calculate the finance charge and new balance using the previous balance method. Previous balance = $199.19 Annual rate = 14% Finance charge = $ New purchases = $97.50 Payments/credits = $75.75 New balance = $

Answer 1

Answer:

The finance charge is $1.44 and the new balance is $222.38.

Step-by-step explanation:

Given : Previous balance = $199.19, Annual rate = 14%,  New purchases = $97.50, Payments/credits = $75.75

To find : Calculate the finance charge and new balance using the previous balance method?

Solution :

First we find the unpaid balance

Unpaid balance = Previous balance - Payments

Unpaid balance =$199.19 - $75.75

Unpaid balance =$123.44

The finance charge formula is

Annual rate = 14%=0.14

Finance charge = Unpaid balance × Annual rate

Finance charge = $\ 123.44\times \frac{0.14}{12}$

Finance charge = $1.44

Now, The new balance formula is

New Balance = Unpaid balance + Finance charge + Purchases

New Balance = $123.44 + $1.44 + $97.50

New Balance = $222.38

Therefore, The finance charge is $1.44 and the new balance is $222.38.