Question

You have a credit card with a balance of $1,187.92 and the interest is 12.25% APR. A late fee of $30.00 is charged for payments after the due date. You missed your payment due date, but plan to make a payment of $125.00 on the next due date. What will be the new principle after that payment?

a) $1,242.39
b) $1,105.05
c) $1,117.61
d) $1,062.92

Answer 1

c) $1,117.61

Explanation:

We assign the variables to the following data:

N = Number of months per year = 12

IB = Initial balance = $1,187.92

Rate = Interest Rate = 12.25% = 0.1225

LPC = Late Payment Charge = $30.00

B = Balance =?

PP = Planned payment = $125.00

NP = New principal =?

To calculate the balance after the late payment charge we can use the following equation:

`B=IB*(1+(Rate)/(N))+LPC`

`B=1,187.92*(1+(0.1225)/(12))+30.00`

B = 1,187.92 * (1 + 0.01021) + 30.00

B = 1,187.92 * (1,01021) + 30.00

B = 1,200.05 + 30.00

B = $1,230.05

Now we calculate the new principal using the following equation:

`NP=B*(1+(Rate)/(N))-PP`

`NP=1,230.05*(1+(0.1225)/(12))-125.00`

NP = 1,230.05 * (1 + 0.01021) - 125.00

NP = 1,230.05 * (1,01021) - 125.00

NP = 1,242.61 - 125.00

NP = $1,117.61

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I hope this helps!

Answer 2

The balance is $1187.92 with interest of 12.25%. Since you missed the due date, the new balance will be
1187.92 (1 + 0.1225/12) + 30 = $1230.05
During the next due date, you pay $125, so the new balance will be:
1230.05 (1 + 0.1225/12) - 125 = $1117.61

The answer is
C.