Chase has a $42,500 line of credit which charges an annual percentage rate of prime rate plus 5%. His starting balance on June 1 was $2,550. On June 4, he borrowed $5,300. On June 9, Chris made a payment of $800, and on June 17, he borrowed $5,600. If the current prime rate is 10%, what is his new balance?

Question

Quizplus · Accepted Answer

To calculate the new balance, we first need to determine the interest accrued on the different amounts for the time they were borrowed, using the daily interest rate (annual rate / 365). The annual percentage rate (APR) is prime rate + 5% = 10% + 5% = 15%. The daily interest rate is 15% / 365 = 0.0411%.1. From June 1 to June 4 (3 days), the balance was $2,550. Interest = $2,550 * 0.0411% * 3 = $3.14.2. From June 4 to June 9 (5 days), the balance was $2,550 + $5,300 = $7,850. Interest = $7,850 * 0.0411% * 5 = $16.13.3. From June 9 to June 17 (8 days), after making a payment of $800, the balance was $7,850 - $800 = $7,050. Interest = $7,050 * 0.0411% * 8 = $23.12.4. From June 17 onwards, after borrowing $5,600, the balance was $7,050 + $5,600 = $12,650. Since we're calculating the balance as of June 17, we don't need to calculate further interest for this step.Adding the interest accrued to the principal:- Initial balance: $2,550- Plus borrowing on June 4: $5,300- Less payment on June 9: -$800- Plus borrowing on June 17: $5,600- Plus total interest: $3.14 + $16.13 + $23.12 = $42.39New balance = $2,550 + $5,300 - $800 + $5,600 + $42.39 = $12,692.39.However, none of the provided options exactly match this calculation. Given the methodology and the options available, it seems there might have been a mistake in the calculation or in the interpretation of the options. The closest option based on the calculation method described is:D) $12,766.83This suggests there may have been an error in the calculation steps or assumptions made, such as the exact number of days counted or the application of the daily interest rate. The correct approach involves calculating interest for each period the balance was outstanding, but without the exact interest calculations aligning to the options, the closest match is chosen based on the methodology described.

Chase Has a $42,500 Line of Credit Which Charges an Annual