SOLUTION: Assume that you start with a balance of $4500 on your MasterCard. Assume that MasterCard has finance charges of 12% APR and that each month you make only the minimum payment of 5%

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Question 1171657: Assume that you start with a balance of $4500 on your MasterCard. Assume that MasterCard has finance charges of 12% APR and that each month you make only the minimum payment of 5% of the balance. During the first month, you charge $250, and during the second month, you charge $600. Complete the following table. (Round your answers to the nearest cent.)
Prev. Balance Min. Payment Purchases Fin. Charge New Balance
Month 1 $ $ $ $ $
Month 2 $ $ $ $ $
Answer by CPhill(1959) (Show Source):
You can put this solution on YOUR website!
Here's the completed table with the calculations:
**Month 1:**
1. **Previous Balance:** $4500.00
2. **Purchases:** $250.00
3. **Finance Charge:**
* Monthly interest rate: 12% APR / 12 months = 1% = 0.01
* Finance charge: $4500.00 * 0.01 = $45.00
4. **New Balance (before payment):** $4500.00 + $250.00 + $45.00 = $4795.00
5. **Minimum Payment:** $4795.00 * 0.05 = $239.75
6. **New Balance (after payment):** $4795.00 - $239.75 = $4555.25
**Month 2:**
1. **Previous Balance:** $4555.25
2. **Purchases:** $600.00
3. **Finance Charge:**
* Finance charge: $4555.25 * 0.01 = $45.55 (rounded to the nearest cent)
4. **New Balance (before payment):** $4555.25 + $600.00 + $45.55 = $5200.80
5. **Minimum Payment:** $5200.80 * 0.05 = $260.04
6. **New Balance (after payment):** $5200.80 - $260.04 = $4940.76
**Completed Table:**
| Month | Prev. Balance | Min. Payment | Purchases | Fin. Charge | New Balance |
| :------ | :------------- | :------------ | :-------- | :---------- | :---------- |
| Month 1 | $4500.00 | $239.75 | $250.00 | $45.00 | $4555.25 |
| Month 2 | $4555.25 | $260.04 | $600.00 | $45.55 | $4940.76 |