   Chapter 13.I, Problem 7RE ### 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

# Anny Winslow has a Bank of America revolving credit account with an annual percentage rate of 12 % calculated on the previous month's balance. Answer the questions that follow using the monthly statement below. a. What is the finance charge?b. What is Anny's new balance?

(a)

To determine

To calculate: The finance charge, if annual percentage rate is 12% and previous month balance is $120.00. Explanation Given Information: Annual percentage is 12% and previous month balance is$120.00. The table showing the transactions is as follows:

 Date Activity Amount ($) September 1−7 Previous month’s balance 120.00 September 8−10 Radio shack 185.52 September 11−13 Payment 115.52 September 14−21 Union oil 138.77 September 22−26 Cash advance 198.77 September 27−30 Safeway supermarket 257.93 Formula used: Step 1: The average daily balance is computed by dividing the total sum of daily balances by the number of days in a billing cycle. Average daily balance=Sum of daily balancesdays in billing cycle Step 2: The finance charge is computed by multiplying the balance of the previous month with the monthly periodic rate. Finance Charge=Previous month balance×periodic rate Calculation: Consider that previous balance is$120.00, annual percentage rate is 12%.

 Dates Number of days Activity/ Amount Unpaid balance (unpaid balance+charge−payment) ($) Daily balances (Unpaid balance×Days) ($) September 1−7 7 Previous month balance 120.00 840 September 8−10 3 Charge 65

(b)

To determine

To calculate: The new balance, if annual percentage rate is 12% and previous month balance is \$120.00.

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