Final answer:
To calculate the total monthly interest on the credit card, determine the daily interest rate and apply it to each balance amount. The monthly interest, in this case, would be approximately $3.75, making option B the correct answer.
Step-by-step explanation:
To calculate the interest for the month on a credit card with an annual interest rate of 15% and an initial balance of $500, we must first account for the payment of $200 that was made on the 2nd day. Here's how you can calculate the monthly interest:
- Divide the annual interest rate by 12 to get the monthly interest rate. In this case, 15% per annum equals a monthly rate of 1.25%.
- Since the payment was made on the 2nd day of the 30-day month, the balance was $500 only for 1 day, and $300 for the remaining 29 days.
- To determine the daily interest rate, divide the monthly interest rate by 30 (the number of days in the month). This gives us a daily rate of 0.04167%.
- Calculate the interest for the 1st day using the initial balance and for the remaining 29 days using the balance after the payment.
- Sum up the daily interest amounts to get the total monthly interest.
So, the calculation is as follows:
- Interest for 1 day at $500 balance: $500 x 0.04167% = $0.20835
- Interest for 29 days at $300 balance: $300 x 0.04167% x 29 = $3.63993
- Total interest for the month: $0.20835 + $3.63993 = $3.84828
The closest answer to $3.84828 is $3.75, which means the correct answer is B: $3.75.