Question

Melissa owns a credit card with a 8.9% APR that calculates interest using the ADB excluding new purchases method. The balance after her last billing cycle was $550. What was her finance charge for this credit card last month? Please show your math. Hint: Put your decimal point in the right place. If it’s 0.015555557, then you would multiply by 0.016, and if it’s 0.65555556 then you would multiply by 0.66.

Answer 1

$4.081

Explanation:

We have been given that Melissa owns a credit card with a 8.9% APR. The balance after her last billing cycle was $550.

First of all, we will find period rate by dividing APR by 12 as 1 years equals 12 months.

`\text{Period rate}=(8.9\%)/(12)=0.74166\%`

The finance charge would be 0.74166% of $550.

`\text{The finance charge}=\$550* (0.742)/(100)`

`\text{The finance charge}=\$550* 0.00742`

`\text{The finance charge}=\$4.081`

Therefore, the finance charge would be $4.081.