The Jewelry Exchange has a $30,000 line of credit with Nations Bank. The annual percentage rate is the current prime rate plus 4.7%. The balance on March I was $8,400. On March 6. the company borrowed $6,900 to pay for a shipment of supplies, and on March 17. it borrowed another $4,500 for equipment repairs. On March 24. a $10,000 payment was made on the account. The billing cycle for March has 31 days. The current prime rate is 9%.
a. What is the finance charge on the account?
b. What is the company's new balance?
c. On April I. how much credit does the Jewelry Exchange have left on the account?
(a)
To calculate: The finance charge if Jewelry Exchange has a
Given Information:
Jewelry Exchange has a
Formula used:
The average daily balance is computed by dividing the total sum of daily balances by the number of days in a billing cycle.
The finance charge can be computed by multiplication of the average daily balance with the periodic rate.
Calculation:
Consider annual percentage rate is current prime rate plus
The annual percentage rate can be computed by adding
Hence, the annual percentage rate is
The periodic rate can be computed by dividing the annual periodic rate by number of months in a year.
Substitute annual percentage rate equals to
Hence, the periodic rate is
Consider that previous balance is
Dates |
No |
(b)
To calculate: The new balance if Jewelry Exchange has a
(c)
To calculate: The remaining credit left on the account on April 1, if Jewelry Exchange has a
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