Question

Use the unpaid balance method to calculate the finance rate on Joanna's credit account.if last month's balance was 15 she made a payment of $375. She bought hiking for $120, and she returned a jacket for $140. Assume the annual interest rate is 21%

Answer 1

I=interest =P*R*T

P=previous month balance=$15

R=interest rate=21%

T=time = 1 month =$\frac{1}{12}$year

now finance charge on last month's balance is

$I=15\ast 0.21\ast \frac{1}{12}$

I= $0.2625

Purchase made =$120

Returns = $140

payment = $375

Therefore, owed money is

previous month balance + finance charge +purchase - returns - payments

= 15+0.2625+120-140-375

= -379.7375

therefore, the finance charge for next month will be

$I=-379.7375\ast 0.21\ast \frac{1}{12}$

I= - $6.6454

the answer came in negative

this means there must be a mistaken value

you can just put the original value in the same procedure