Question

# You have a credit card with an APR of 12%. You begin with a balance of...

You have a credit card with an APR of 12%. You begin with a balance of \$200, in response to which you make a payment of \$100. The first month you make charges amounting to \$50. You make a payment of \$100 to reduce the new balance, and the second month you charge \$55. Complete the following table. (Round your answers to the nearest cent.)

Previous
balance
Payments Purchases Finance
charge
New
balance
Month 1 \$200.00 \$ \$ \$ \$
Month 2 \$ \$ \$ \$ \$

No payment is mentioned in the 2nd month. Further, a payment of \$100 is mentioned in the 1st month twice. We presume that there is only 1 such payment.

An APR of 12 % means 1 % per month.

1. In the 1st month, the opening balance is \$ 200. After fresh purchases of \$ 50 and a payment of \$ 100, the balance changes to \$ 150. The finance charge ( interest) is 1 % of \$ 150 = \$ 1.50
2. In the 2nd month, the opening balance is \$ 151.50. After fresh purchases of \$ 55 and in absence of any payment, the balance changes to \$ 206.50. The finance charge ( interest) is 1 % of \$ 206.50 = \$ 2.07 ( on rounding off to the next higher cent).

The table , duly completed is as under:

 Previous balance(\$) Payments(\$) Purchases(\$) Finance charge (\$) New Balance(\$) Month1 200 100 50 1.50 151.50 Month2 151.50 0.00 55 2.07 208.57