Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Example 2: Alex has a charge account at Diamond Jewelers, which uses the unpaid-balance method of computing finance charges. The periodic rate is 1.85%. If their previous balance is $478.68, they had payments/credits of $250.00, and new purchases of $38.50 what is their (a) unpaid balance, (b) finance charge, and (c) new balance?
Example 3: Roger’s charge account uses the unpaid balance method to compute the finance charge a t monthly periodic rate of 2.3%. During the month he charged $128.47. made a $150 payment and had a $7.45 finance charge. What is his (a) unpaid balance, (b) finance charge, and (c) new balance?
Unpaid Balance = Previous Balance – (Payments + Credits) Finance Charge = Unpaid Balance × Periodic Rate
New Balance = Unpaid Balance + Finance Charge + New Purchases
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The unpaid balance method would be considered as the interest charged for the balance which is not paid yet and also there would be some sort of working being considered to calculate the accumulated amount. The company uses such method to check the overall account payment from the customer and it is also used by the banking industries.
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