Final answer:
To calculate the difference in interest between the previous balance and adjusted balance methods for Suzy's credit card, we determine the daily interest rate from the APR and apply it to the outstanding balance. Suzy would pay $138.31 in interest using the previous balance method and only $90.63 with the adjusted balance method, which means she would pay $47.68 more with the previous balance method.
Step-by-step explanation:
The student's question involves calculating the difference in interest charged between two different methods of calculating credit card interest: the previous balance method and the adjusted balance method. To solve this, we need to understand that the previous balance method charges interest on the full balance throughout the entire billing cycle, while the adjusted balance method charges interest on the remaining balance after a payment is made.
Firstly, we'll calculate the daily interest rate, since the APR is annual: 22% APR means 22 / 365 = 0.0603% per day. Suzy's interest using the previous balance method would be $7400 for the entire 31 days at this daily rate. Using the adjusted balance method, she would only pay interest on $7400 for 15 days, and then on $2500 ($7400 - $4900) for the remainder of the cycle (16 days).
Interest using the previous balance method: $7400 * 31 days * 0.0603% = $138.31
Interest using the adjusted balance method: ($7400 * 15 days * 0.0603%) + ($2500 * 16 days * 0.0603%) = $66.39 + $24.24 = $90.63
The difference in interest would be $138.31 (previous) - $90.63 (adjusted) = $47.68, which is the amount more Suzy would pay using the previous balance method compared to the adjusted balance method.