Question

Jennifer has a credit card with an APR of 10. 22% and a billing cycle of 30 days. The following table shows Jennifer’s credit card transactions in the month of January. Date Amount ($) Transaction 1/1 807. 94 Beginning balance 1/7 41. 81 Purchase 1/8 53. 88 Payment 1/16 75. 00 Purchase 1/20 18. 65 Purchase 1/26 25. 00 Payment How much greater will Jennifer’s January finance charge be if the finance charge is calculated using the previous balance method than if it is calculated using the adjusted balance method? a. $0. 48 b. $1. 15 c. $0. 67 d. $0. 85.

Answer 1

Answer:

✅C. $0.67

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Answer 2

Jennifer's January finance charge will be $0.6717 more if it is calculated using the previous balance method.

what is the difference between the previous balance method and the adjusted balance method?

Previous balance method: Interest charges are based on the amount owed at the beginning of the previous month's billing cycle.

Adjusted balance method: Bases finance charges on the amount(s) owed at the end of the current billing cycle after credits and payments have been posted.

the total amount on which interest will be applied using the previous balance method = 807.94+41.81+75+18.65 = $943.4

so, interest levied on this= 943.4*10.22*(30/360)*(1/100)= $8.0346

now, the total amount on which interest will be applied using the adjusted balance method = 807.94+41.81+75+18.65-53.88-25 = $864.52

so, interest levied on this = 864.52*10.22*(30/360)*(1/100)= $7.3628

difference between charges by previous balance method and adjusted balance method = 8.0346-7.3628 = $0.6717

therefore, Jennifer's January finance charge will be $0.6717 more if it is calculated using the previous balance method.

to get more about the previous balance method and the adjusted balance method please refer to the link,

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