   Chapter 13.I, Problem 4RE ### 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

# Calculate the missing information on the following revolving credit accounts. Interest is calculated on the unpaid or previous month’s balance. Annual Monthly Purchases PaymentsPrevious Percentage Periodic Finance and Cash and NewBalace Rate (APR) Rate Charge Advances Credits Balance$2,390.00 ___ 1 1 4 % ______$1,233.38 $300.00 _______ To determine To calculate: The annual percentage rate, finance charge and new balance if previous balance is$2,390.00, monthly periodic rate is 114%, purchase and cash advances are $1,233.38 and payments and credits are$300.00

Explanation

Given Information:

Previous balance is $2,390.00, monthly periodic rate is 114%, purchase and cash advances are$1,233.38 and payments and credits is $300.00 Formula used: Follow the steps to compute the finance charge and new balance by using the unpaid balance method: Step1: The formula of the annual percentage rate is computed by multiplying the annual percentage rate and then the answer is divided with the number of months in a year that is by 12. Annual Percentage Rate=Monthly Periodic Rate×12 Step2: The formula of finance charge is computed by multiplying the balance of the previous month with the monthly periodic rate. Finance Charge=Average daily balance×periodic rate Step3: The formula of the new balance is computed by adding all previous month balance, finance charge, purchases and cash advances and subtract the total of payments and credits. New balance= Previous balance +Finance charge+Purchases and cash advancesPayments and credits Calculation: Consider that previous balance is$2,390.00, monthly periodic rate is 114%, purchase and cash advances are $1,233.38 and payments and credits is$300.00

Compute the annual percentage rate by substituting monthly periodic rate equals to 114% and time period equals to 12 months,

Annual percentage Rate=Monthly periodic rate×12=114%×12=15%

Hence, annual percentage rate is 15%

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