Answer:
$67,750
Explanation:
To calculate the finance charge on the average daily balance for a credit card over a one-month period, you can use the Average Daily Balance (ADB) method. This method considers the balance on the card for each day and calculates the average daily balance over the billing cycle.
Here's how you can calculate it:
First, you need to determine the daily balances and the number of days for each balance.
Days 1-5: $200 balance for 5 days.
Days 6-20: $2350 balance for 15 days (21 - 6).
Days 21-30: $3150 balance for 10 days (assuming a 30-day billing cycle).
Calculate the daily balance × number of days for each period:
Days 1-5: $200 × 5 = $1,000
Days 6-20: $2,350 × 15 = $35,250
Days 21-30: $3,150 × 10 = $31,500
Sum up the totals for each period:
Total Balance = $1,000 + $35,250 + $31,500 = $67,750
Calculate the average daily balance by dividing the total balance by the number of days in the billing cycle (30 in this case):
Average Daily Balance = $67,750 / 30 = $2,258.33 (rounded to two decimal places)
Now, to find the finance charge, you can use the formula:
Finance Charge = Average Daily Balance × Daily Interest Rate × Number of Days in the Billing Cycle
Daily Interest Rate = (Annual Percentage Rate) / 365
APR is 12%, so the Daily Interest Rate = 0.12 / 365
Finance Charge = $2,258.33 × (0.12 / 365) × 30
Now, calculate the finance charge:
Finance Charge ≈ $21.75
So, the finance charge on the average daily balance for this card over the one-month billing cycle is approximately $21.75. Please note that this is a simplified calculation and may not account for factors like minimum payments or changes in the balance over time, but it provides a reasonable estimate.