Question

Calvin’s credit card computes finance charges using the daily balance method. His card has a billing cycle of 30 days and an APR of 14.75%. The following table details Calvin’s transactions in the month of September.

Date: 9/1 Amount: $716.54 Transaction: Beginning Balance
Date: 9/7 Amount $84.94 Transaction: Purchase
Date: 9/12 Amount: $15.69 Transaction: Purchase
Date: 9/20 Amount: $200.00 Transaction: Payment


What will Calvin’s starting balance be next month?
a.
$617.17
b.
$624.74
c.
$625.91
d.
$623.52

THE ANSWER: C. $625.91

Answer 1

To calculate Calvin's starting balance next month, you need to calculate the average daily balance for the billing cycle and apply the finance charges. The correct answer is $625.91.

Step-by-step explanation:

To calculate Calvin's starting balance next month, we need to calculate the average daily balance for the billing cycle and then apply the finance charges. Here is the step-by-step calculation:

1. Calculate the number of days for each transaction: Beginning Balance (30 days), Purchase on 9/7 (24 days), Purchase on 9/12 (19 days), Payment on 9/20 (11 days).
2. Calculate the daily balance for each transaction by multiplying the amount by the number of days: Beginning Balance ($716.54 x 30), Purchase on 9/7 ($84.94 x 24), Purchase on 9/12 ($15.69 x 19), Payment on 9/20 ($200.00 x 11).
3. Add up the daily balances for all transactions: Beginning Balance + Purchase on 9/7 + Purchase on 9/12 - Payment on 9/20.
4. Divide the total daily balance by the number of days in the billing cycle: Total Daily Balance / 30.
5. Apply the APR to the average daily balance to calculate the finance charges: Average Daily Balance x (APR / 365) x Number of Days in the billing cycle.
6. Finally, subtract the finance charges from the average daily balance to get the starting balance next month.

Based on the provided information, the correct answer is

$625.91

as option C.

Answer 2

the answer is actually a