Question

Lani is unable to pay her credit card balance in full, so she carries a balance on the card from month to month. During a short period, Lani has some unexpected expenses and makes no payment for two consecutive billing cycles. As a result, the credit card company exercises the option to increase the APR from 12.99% to 22.99%, according to the terms of the credit card agreement. The following table shows the average daily balance that Lani carries for a three-month period. Calculate the interest charged at APRs of both 12.99% and 22.99%. Enter your answers in the two columns on the right in the chart below. Round off your answers two places to the right of the decimal point.

$2,433.33
12.99%
23.99%
$2,615.19
12.99%
23.99%
$1,978.90
12.99%
23.99%

Answer 1

To calculate the interest charged at both APRs of 12.99% and 22.99%, you can use the formula for calculating simple interest:

Interest = Principal x Rate x Time

First, we need to determine the time period for each balance. Assuming these are monthly balances:

For the first balance of $2,433.33, let's assume it's for one month.

For the second balance of $2,615.19, also for one month.

For the third balance of $1,978.90, one month as well.

Now, we can calculate the interest charged at both APRs for each balance.

For the APR of 12.99%:

1. For the first balance:

Interest = $2,433.33 x 0.1299 x 1 = $317.02 (rounded to two decimal places)

2. For the second balance:

Interest = $2,615.19 x 0.1299 x 1 = $339.67 (rounded to two decimal places)

3. For the third balance:

Interest = $1,978.90 x 0.1299 x 1 = $257.18 (rounded to two decimal places)

Now, let's calculate the interest at the APR of 22.99% for each balance:

1. For the first balance:

Interest = $2,433.33 x 0.2299 x 1 = $559.94 (rounded to two decimal places)

2. For the second balance:

Interest = $2,615.19 x 0.2299 x 1 = $600.51 (rounded to two decimal places)

3. For the third balance:

Interest = $1,978.90 x 0.2299 x 1 = $456.04 (rounded to two decimal places)

So, the interest charged at the APR of 12.99% and 22.99% for each balance is as follows:

| Average Daily Balance | 12.99% Interest | 22.99% Interest |

| $2,433.33 | $317.02 | $559.94

| $2,615.19 | $339.67 | $600.51

| $1,978.90 | $257.18 | $456.04