Question

To the nearest cent, what is the finance charge, if the charge is computed on average daily balance at a periodic monthly rate of 3.2%?

Answer 1

Finance charge is $100.34

Explanation:

Given : The table attached in the question and the charge is computed on average daily balance at a periodic monthly rate of 3.2%.

To find : What is the finance charge?

Solution :

We have given the number of days and sum of balances.

So, we find the finance charge of each dates one by one.

Finance rate = 3.2%=0.032

Using the formula,

`F=\frac{\text{No. of days}}{\text{total days}}* \text{sum of balance}* \text{finance rate}`

Refer the table,

First finance charge is,

Number of days=5, Total number of days = 31 , Finance rate = 0.032 , sum of balance=$1375

`F_1=(5)/(31)* 1375* 0.032`

`F_1=7.096`

Similarly, we put all the values from the table and we get,

`F_2=(1)/(31)* 385* 0.032`

`F_2=0.397`

`F_3=(9)/(31)* 3465* 0.032`

`F_3=32.190`

`F_4=(1)/(31)* 260* 0.032`

`F_4=0.268`

`F_5=(15)/(31)* 3900* 0.032`

`F_5=60.387`

Now, the total finance charge is

`F=F_1+F_2+F_3+F_4+F_5`

`F=7.096+0.397+32.190+0.268+60.387`

`F=\$100.34`

$1=100 cent

$100.34=10034 cent.