Question

The new balance of a charge account is $145.00. The minimum payment is $20.00. If the interest rate is 1.5%, how much will the new balance be next month?

Answer 1

The balance is $145 but after one makes he minimum payment of $20, there is $125 left to pay. However interest is added before the next month’s bill is generated.

Remember that percent means out of 100. 1.5% means 1.5/100 = .015

To find 1.5% of 125 we multiply (.015)(125) = 1.875 But as this is money the interest is rounded to two decimal places and so is $1.88

We add this to 125 to get next month’s balance which is 125 + 1.88 = $126.88