Question

Calculate the finance charge and new balance using the previous balance method. Previous balance = $350.55

Annual rate = 18%

Finance charge = $

New purchases = $59.95

Payments/credits = $150.00

New balance = $

Answer 1

Finance charge
350.55×(0.18÷12)=5.26
New balance
350.55−150+5.26+59.95=265.76

Answer 2

Finance charge = $5.258

New Balance = $265.758

Explanation:

By previous balance method,

Finance charge = Previous balance×Periodic percentage rate

Periodic percentage rate = APR/12 =
`(0.18)/(12)`

= 0.015

Finance charge = 350×0.015

= $5.258

Also, new balance = Previous balance+New purchases+Finance charge-Payments/credits

New balance = 350.55+459.95+5.258-150

= $265.758