**Problem 16: Calculating Finance Charges using Unpaid Balance Method**Calculate the finance charge on Joanna’s credit account using the unpaid balance method given the following information:- Last month's balance: $1,350- Payment made: $375- Purchase of hiking boots: $120- Return of a jacket: $140- Annual interest rate: 21%**Steps to Solve:**1. **Determine the Unpaid Balance:** - Start with last month's balance: $1,350 - Subtract the payment made: $1,350 - $375 = $975 - Add the new purchase of hiking boots: $975 + $120 = $1,095 - Subtract the return of the jacket: $1,095 - $140 = $9552. **Calculate the Monthly Interest Rate:** - Convert the annual interest rate to a monthly rate: 21% / 12 = 1.75%3. **Calculate the Finance Charge:** - Multiply the unpaid balance by the monthly interest rate: $955 * 1.75% = $955 * 0.0175 = $16.71Therefore, the finance charge on Joanna’s credit account for this month is $16.71.

Use the unpaid balance method to calculate the finance charge on Joanna's credit account if last month's balance was $1,350, she made a payment of $375, she bought hiking boots for $120, and she returned a jacket for $140. Assume an annual interest rate of 21%.

Use the unpaid balance method to calculate the finance charge on Joanna's credit account if last month's balance was $1,350, she made a payment of $375, she bought hiking boots for $120, and she returned a jacket for $140. Assume an annual interest rate of 21%.

PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)

6th Edition

ISBN:9781337117005

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter6: Using Credit

Section: Chapter Questions

Problem 3FPE

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