   Chapter 13.I, Problem 1TIE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Mike Dennis has a Bank of America account with an annual percentage rate of 15%. His previous month’s balance is $214.90. During July, Mike’s account showed the following activity. What is the finance charge for July, and what is Mike’s new balance? To determine To calculate: The finance charge and new balance if Mike Dennis has a Bank of America account with the previous month balance is$214.90 and the annual percentage rate is 15%.

Explanation

Given Information:

Mike Dennis has a Bank of America account with the previous month balance is $214.90 and the annual percentage rate is 15%. The table showing the transactions is as follows:  Dates Activity Amount ($) July 6 Royal cleaners 35.50 July 9 Payment 40.00 July 15 Macy’s 133.25 July 16 Antonio’s restaurant 41.10 July 21 CVS pharmacy 29.00 July 27 CVS pharmacy (credit) 9.12

Formula used:

Follow the steps to determine finance charge and new balance through unpaid balance method:

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

Periodic Rate=Annual Percentage Rate12

Step 2: The formula of finance charge is computed when the balance of the previous month is multiplied with the average daily balance.

Finance Charge=Previous month's balance×periodic rate

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

New balance= Previous rate +Finance rate+Purchase and cash advancesPayments and credits

Calculation:

The formula for the periodic rate is computed by dividing the annual percentage rate by the number of months in a year.

Substitute the annual percentage rate by 15% and time period b 12 months

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