Question

Francis has an unpaid balance of $480 on his credit card. The annual percentage rate is 12%. What is the finance charge on his next monthly statement?

Answer 1

$4.80

Explanation:

You want to know the finance charge on a balance of $480 if the APR is 12%.

Finance charge

The monthly finance charge is the product of the monthly interest rate and the balance. The monthly interest rate is 1/12 of the annual rate.

finance charge = (1/12 · 12%) · $480 = 0.01 · $480 = $4.80

The finance charge on the next monthly statement is $4.80.