Chapter 13.I, Problem 10RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Kathy Hansen has a revolving credit account. The finance charge is calculated on the previous month's balance, and the annual percentage rate is 21%. Complete the following five-month account activity table for Kathy.

Previous |
Purchases |
|||||||||||

Month's |
Finance |
and Cash |
Payments |
Nest Balance |
||||||||

Month |
Balance |
Charge |
Advances |
and Credits |
End of Month |
|||||||

10. | May | $282.33 | $105.00 |

To determine

**To calculate:** The finance charge and the new balance if Kathy Hansen has a revolving credit account, the previous month’s balance is

Explanation

**Given Information:**

Kathy Hansen has a revolving credit account, previous month’s balance is

**Formula used:**

Follow the steps mentioned below to compute the finance charge and new balance by using the unpaid balance method:

Step 1: The monthly periodic rate is computed by dividing the annual percentage rate by the number of months in a year that is

Step 2: The finance charge is computed by multiplication of the previous month balance with the monthly periodic rate.

Step 3: The new balance is computed by adding all previous month balance, finance charge, purchases and cash advances and subtracting the total of payments and credits.

**Calculation:**

Consider the previous month’s balance

Compute monthly periodic rate by substituting annual percentage rate equals to

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