SECTION 7 2 Finance Charge Unpaid Balance Method

SECTION 7 -2 Finance Charge: Unpaid Balance Method pp. 261 -263

SECTION 7 -2 • • • Click to edit Master text styles Section Objective Second level Find: Third level • finance charge by using the Fourth level unpaid-balance method Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 2 MBA, Section 7 -2, Slide 2 of 15

SECTION 7 -2 • • • Click edit Master text styles Keyto. Words to Know Second level unpaid-balance method (p. 261) Third level Computing the finance charge on a credit Fourth level account based on the portion of the previous Fifth level balance that has not been paid. 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 3 MBA, Section 7 -2, Slide 3 of 15

SECTION 7 -2 • Click to edit Master text styles Formula • Second level Unpaid Balance = Previous Balance – (Payments + Credits) • Third level Finance Charge = Unpaid Balance × Periodic Rate • Fourth level New Balance = Unpaid Balance + Finance Charge + New Purchases • Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 4 MBA, Section 7 -2, Slide 4 of 15

SECTION 7 -2 • Click to edit Master text styles • Second level • Third level A Financial Gem? p. 261 • Fourth level What is Yuma’s new balance if the • Fifth level finance charge for an unpaid balance is 1. 9 percent annual interest rate? 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 5 MBA, Section 7 -2, Slide 5 of 15

SECTION 7 -2 • • • Click to edit 1 Master text styles Example Second level A portion of Lucille Sherman’s charge Third level account statement is shown in Figure 7. 3 Fourth levelmonthly finance charge is 1. 5 below. The percent of the unpaid balance. Fifth level What is the new account balance? 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 6 MBA, Section 7 -2, Slide 6 of 15

SECTION 7 -2 • • • Click to edit Figure 7. 3 Master text

SECTION 7 -2 • • • Click to edit 1 Master text styles Example Answer: Step 1 Second level Find the unpaid balance. Third level Previous Balance – (Payments + Credits) Fourth level $132. 40 – $40. 00 = $92. 40 Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 8 MBA, Section 7 -2, Slide 8 of 15

SECTION 7 -2 • • • Click to edit 1 Master text styles Example Answer: Step 2 Second level Find the finance charge. Third level Unpaid Balance × Periodic Rate Fourth level $92. 40 × 1. 5% = $1. 386 or $1. 39 Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 9 MBA, Section 7 -2, Slide 9 of 15

SECTION 7 -2 • • • Click to edit 1 Master text styles Example Answer: Step 3 Second level Find the new balance. Third level Unpaid Balance + Finance Charge + New Purchases Fourth level $92. 40 + $1. 39 + $79. 55 = $173. 34 Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 10 MBA, Section 7 -2, Slide 10 of 15

SECTION 7 -2 • • • Click to edit 2 Master text styles Example Second level Alejandro Martinez has a charge account Third level which uses the unpaid-balance method of Fourth levelfinance charges. The periodic computing rate is 1. 85 percent. If his previous balance Fifth level is $478. 68 and he had payments and credits of $250. 00, find his unpaid balance and finance charge. If he has new purchases of $38. 50, find his new balance. 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 11 MBA, Section 7 -2, Slide 11 of 15

SECTION 7 -2 • • • Click to edit 2 Master text styles Example Answer Second level Step: Find the new balance. Third level Unpaid balance = $478. 68 – $250. 00 = $228. 68 Fourth level Finance charge = $228. 68 × 1. 85% = $4. 23058 or $4. 23 Fifth level New balance = $228. 68 + $4. 23 + $38. 50 = $271. 41 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 12 MBA, Section 7 -2, Slide 12 of 15

SECTION 7 -2 • • • Click to edit 1 Master text styles Practice Second level Previous balance of $390. Third level Payments and credits total $225. Fourth level Periodic interest rate is 1. 5 percent. Fifth level What is the unpaid balance? What is the finance charge? New purchases of $60. 98. What is the new balance? 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 13 MBA, Section 7 -2, Slide 13 of 15

SECTION 7 -2 • • • Click to edit 1 Master text styles Practice Answer Second level Unpaid balance: $165. 00 Third level Finance charge: $2. 48 Fourth level New balance: $228. 46 Fifth level 10/30/2020 Copyright © Glencoe/Mc. Graw-Hill 14 MBA, Section 7 -2, Slide 14 of 15

END OF SECTION 7 -2 Finance Charge: Unpaid Balance Method