Question

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	$	$	$	$	$

Answer 1

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

An APR of 12 % means 1 % per month.

1. In the 1^st 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 2^nd 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