On Jan. 1, Mr Green bought new windows. The price of the windows was $3500 and M

Question

On Jan. 1, Mr Green bought new windows. The price of the windows was $3500 and Mr. Green charged the windows to his credit card. The CC is interest free for a full 6 months on any purchase over $299, but if after 6 months the purchase is not paid in full, the customer owes interest on the original purchase price and for the full 6 months. Interest is computed as simple interest at an APR of 23.5%. At the end of 6 months, he still a balance of $200. How much interest did Mr. Green get charged on the CC statement that closed July 1?

Explanation / Answer

On Jan 1 Mr. Green purchased a new window with price $3500 on credit card.

The credit card is interest free for 6months for any amount above $299, and if not paid in full after 6months the customer owes interest on the original price and for the full 6months.

After 6months it shows a balance of $700.

Thus he has paid $3500-$700=$2800

However, he has not aid full amount. Thus interest charged will be on full amount $3500 at the simple interest 23.5% per annum.

Now 6months have passed, so it is ½ x 23.5%

So interest accrued till July 1 =$ 3500 x 0.235 x 0.5=$411.25

The interest charged on the cc statement that closed July 1, is $411.25.

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