**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%.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Joshua borrowed $1,400 for one year and paid $70 in interest. The bank charged him a service charge…

A: Principal Amount = p = $1400Interest = i = $70Service Charges = sc = $12Number of Payment = n = 12

Q: QUESTION: Kari is purchasing a home for $220,000. The down payment is 25% and the balance will be…

A: Variables in the question:Cost of home=$220,000Down payment=25%Balance will be financed with…

Q: find her loan payoff amount.

A: Amount financed = $27,500 Number of instalments = 36Monthly payment = $998.61Payment made = 21Total…

Q: What is the finance charge (in $) on the loan? $ (b) Use Table 13-1 to find what annual percentage…

A: Finance Charge: It is the cost in relation to borrowing money or the payment of any loan…

Q: Katherine Hunt is evaluating her debt safety ratio. Her monthly take-home pay is $3,160. Each month,…

A: The safety ratio, often used in personal finance and investment, is a financial metric that assesses…

Q: Kim received a credit card statement that has a new balance of $245.98 and a minimum payment of…

A: The interest on the credit card refers to the amount that the issuing company charges on the use of…

Q: Maya borrowed $700 from a lender that charged simple interest at an annual rate of 6%. When Maya…

A: A loan is a borrowing that an individual or entity takes into account. A lender is the other side in…

Q: Stacy took out a loan for $15,000. Her note was for 300 days at 5% ordinary interest. On day 100 she…

A: The formula for calculating simple interest Simple Interest(I) = P*r*t Where, I = Interest Amount P…

Q: o help open up a jewelry store, Kaitlin borrowed money from her credit union. She took out a…

A: Time value of money is used to calculate the monthly instalments, rate of interest, total amount to…

Q: If you are trying to build credit by using a credit card, each time you make a purchase with the…

A: Interest Rate = 6% APR Previous Balance = $1,173 Calculation of Number of days between is as follow:…

Q: Meghan Pease purchased a small sailboat for $8,350. She made a down payment of $1,700 and financed…

A: Cost of sailboat = $8,350Down payment = $1,700Monthly payment = $237.38Number of period = 36 months

Q: the amount financed the finance charge The deferred payment price.

A: Loan amortization refers to a schedule which is prepared to shows the periodic loan payments, amount…

Q: Scarlett borrowed $ 1,900 from a local payday lender and signed a debt contract requiring her to pay…

A: The annual percentage rate is a simple rate that does not include compounding however the effective…

Q: Assume that Louisa carried an average balance of $1,000 from her credit card purchases over the past…

A: Interest charges are the amount of cost and charges paid for the amount borrowed either for personal…

Q: , Jane borrows an amount of money L. She repays it in 360 equal monthly payments at the end of each…

A: A loan is a contract where a party forwards the money to another party on the promise of repayment…

Q: Meghan Pease purchased a small sailboat for $8,350. She made a down payment of $1,300 and financed…

A: finance charges refer to the fees or interest that a borrower pays to a lender for the use of credit…

Q: Jennifer Richards went to her credit union to borrow $5,500 at a rate of 8.11 % p.a. The date of the…

A: Data given: P=Loan amount = $ 5,500 r=Rate= 8.11% p.a. Date of the loan = September 7 Date of…

Q: Abigail's calculations show that the total interest owed to Sanjeev on her 3, 700 loan is 177.60. If…

A: Step 1: Step 2: Step 3: Step 4:

Q: Flip opened a credit card account. During the first month he purchased new cloths that totaled…

A: Purchase made on credit card: $1,505.57.Monthly decrease in balance: 1.9%

Q: Meghan Pease purchased a small sailboat for $8,350. She made a down payment of $1,300 and financed…

A: The Annual Percentage Rate (APR) is similar to the interest rate. It is on a yearly basis that is…

Q: On August 19, Siobhan O’Sullivan started an ordinary annuity. She arranged to have $150 deducted…

A: Annuity refers to the fixed periodic payments which are paid monthly, quarterly, semi-annually or…

Q: a) What is the finance charge (in $) on the loan? $ 1,559.68 Incorrect: Your answer is incorrect.…

A: Interest refers to the cost of money borrowed from a lender. It can be simple or compound. It is…

Q: Joseph Simpson, a student at State College, has an average balance of $250 on his retail charge…

A: Monthly interest refers to the amount of money charged or earned on a financial account, such as a…

Q: Use the unpaid balance method to find the finance charge on the credit card account. Last month's…

A: Unpaid balance method In case of the unpaid balance method, the finance charge is based on all…

Q: Jennifer has a 60-month fixed installment loan, with a monthly payment of $223.04. The amount she…

A: Unearned Interest: Unearned interest is interest that a lender has collected but has not yet earned…

Question

**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 = $955

2. **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 = $16.71

Therefore, the finance charge on Joanna’s credit account for this month is $16.71.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Frauds in Accounting information system (AIS)

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Cathy borrowed a student loan for $700 and agreed to pay off the loan $740 one month later. what is the annual interest rate? assume it's computed using simple intrest
Meghan Pease purchased a small sailboat for $8,350. She made a down payment of $1,700 and financed the balance with monthly payments of $239.38 for 36 months. (a) What is the finance charge (in $) on the loan? $ (b) Use Table 13-1 to find what annual percentage rate was charged on Meghan's loan. (Round your answer to two decimal places.) %
Jennifer Kaufman bought a used Toyota Prius for $16,500. She made a $4,500 down payment and is financing the balance at a particular bank over a 3 year period at 12% interest. As her banker, calculate what equal monthly payments (in $) will be required by Jennifer to amortize the car loan. (Round your answer to the nearest cent.)
Help
A woman decides to purchase a $23000 car, and makes down payment of $3500. She arranges to borrow the remainder from a bank that will charge her 4.5% interest. She will make monthly payments for 4 years. a. Find her monthly payment amount b. determine the total amount she would pay for the car and the total amount of interest paid
narubhai
Please help me answer the following time value of money question. Edison borrowed $10,000 from the Niederriter Loan Company. He has to pay off the loan in 36 monthly payments of $500. What interest rate is he being charged?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS