Question

Jackson has a previous balance of $767 on a credit card with a 16.5% APR compounded monthly. If he made a payment of $49 this month, what is the new balance on his credit card?

Answer 1

okay so i need to add all the interest rates and charges? then subtract them form 767?

Answer 2

but that about the 49?

Answer 3

thanks!

Answer 4

why do i need to know the apy i thought i needed to find the balance

Answer 5

so 85.56?

Answer 6

Aiko, your responses seem to be using different methods! After the first reply you seemed to go on to explain a different method. I believe \[(1+\frac{apr}{n})^n = apy\] is the correct equation if the effective APR is given.

Answer 7

(where n is the number of times interest is added per year, apr is the nominal APR, and apy is the effective APR)

Answer 8

okay so is 85.56 the correct APY? and if so what do i do with that to get the balance?

Answer 9

add and subtract what? that makes no sense to me, i dont know what any of those have to do with APY. or what to do with the previous balance and the payment of 49

Answer 10

The question's wording is strange. My assumption is that the money is paid out and then interest is calculated? This would make the new balance \[(767-49)(1+\frac{apr}{n})\]
If this is indeed what the question asks, the answer can be calculated using the equation in my previous post, remembering that n=12 since the balance is done monthly.

Answer 11

ok i think its better if @Indivicivet explains and i stay out becuase i am producing to much confusion for u @OtakuPrincess

Answer 12

okay i got 1705.25 but thats not one of my choices :/

Answer 13

oh wait i think i forgot to move the decimal! 727.87?

Answer 14

thats a lot closer to one of my choices

Answer 15

My mistake, in the first equation it should be 1+apy instead of apy. Rearranging the first equation I posted gives:
\[1+\frac{apr}{n} = \sqrt[n]{1+apy}\]
n=12 and apy = 0.165, therefore:
\[1+\frac{apr}{n}\approx1.013\]
Inserting into the second equation gives
\[Balance\approx(767-49)(1.013) = 718*1.013\approx727.196\]
I used the exact figures throughout my calculation. What are your choices? I might've made a mistake but otherwise, if they don't match up with this, I'd expect the question may be asking something different. As I said before, it was badly worded.

Answer 16

$718.00

$728.55

$844.56

$893.56
OOHH okay thanks i get that and its super close to 728.55

Answer 17

Wait, $718 is an answer? I feel like this could be a trick question based on awful wording.