To explain how the new balance is calculated, we will break down the provided information and illustrate each step in detail using the correct methodology.
Guadalupe's credit card balance is adjusted each month based on the components: Previous balance, New charges, Payment received, and Finance charges. Here is the step-by-step process:
1. Previous Balance: The amount carried over from the previous month.
2. New Charges: The sum of new expenditures for the month.
3. Payment Received: Any amounts paid by Guadalupe during the month.
4. Finance Charges: Interest charges applied to the previous balance calculated at the annual percentage rate (APR).
Given these components, we need to compute two main values:
- Principal Paid: This is the part of the payment received that goes towards reducing the principal amount owed. It is calculated by subtracting the finance charges from the payment received.
- New Balance: This is updated by adding new charges and subtracting the principal paid from the previous balance.
Let's use the provided table's values (as processed in our example) to clarify how we get the new balance for the given month.
### Given Values:
- Previous Balance: \[tex]$1000
- New Charges: \$[/tex]500
- Payment Received: \[tex]$100
- Finance Charges: \$[/tex]10
### Steps to Calculate:
1. Calculate the Principal Paid:
[tex]\[
\text{Principal Paid} = \text{Payment Received} - \text{Finance Charges}
\][/tex]
Substituting the values:
[tex]\[
\text{Principal Paid} = \$100 - \$10 = \$90
\][/tex]
2. Calculate the New Balance:
[tex]\[
\text{New Balance} = \text{Previous Balance} + \text{New Charges} - \text{Principal Paid}
\][/tex]
Substituting the values:
[tex]\[
\text{New Balance} = \$1000 + \$500 - \$90 = \$1410
\][/tex]
Hence:
- The Principal Paid is \[tex]$90.
- The New Balance is \$[/tex]1410.
### Conclusion
The new balance calculation follows the formula:
[tex]\[
\text{New Balance} = \text{Previous Balance} + \text{New Charges} - (\text{Payment Received} - \text{Finance Charges})
\][/tex]
By following these steps, we can compute the monthly updates to Guadalupe's credit card balance accurately.
