Question

The opening balance of one of Jennies 30-day billing cycles for her credit card was $1220, and it remained that amount for the first 10 days of her billing cycle. She then made a purchase for $470, increasing her balance to $1690, where it remained for the next 10 days. Jennie then made a payment of $350, so her balance for the last 10 days of the cycle was $1340. The APR of Jennies credit card is 33%, QUESTION 1: What is her periodic interest rate? QUESTION 2: How much was Jennie charged in interest for the billing Cycle?

Answer 1

1) 2.71%

2) $38.32

Explanation:

Opening balance = $1220

Balance after 10 days (after expense) = $1690

Balance after 10 days(after payment) = $1340

APR = 33%

1) Periodic interest rate = APR ×
`(No. of days in a billing cycle)/(365)`

= 33%× 30/365

= 2.71%

2) Interest charged for first 10 days =
`(1220*2.71*(10)/(30) )/(100)`

= $11.02

Interst charged for the next 10 days =
`(1690*2.71*(10)/(30) )/(100)`

= $15.2

Interest charged for the next 10 days =
`(1340*2.71*(10)/(30) )/(100)`

= $12.10

Total interest for 30 days = 11.02+15.2+12.10

= $38.32