Final answer:
To find Peter's monthly finance charge for his credit card with an average daily balance of $2,989 and an APR of 20%, convert the APR to a daily rate, multiply by the average daily balance, and then by the number of days in the month to get the monthly interest, and round it to the nearest cent, which would be $49.09.
Step-by-step explanation:
The student is asking how to calculate the finance charge on a credit card with a specified average daily balance and annual percentage rate (APR). To calculate the monthly finance charge for Peter's credit card, which has an average daily balance of $2,989 and is subject to a finance charge at an APR of 20%, we use the following steps:
Convert the APR to a daily rate: APR / 365. For 20%, it would be 0.20 / 365 = 0.0005479.
Multiply the daily rate by the average daily balance: 0.0005479 * $2,989 = $1.63623.
Multiply the daily interest by the number of days in the month (assuming 30 days): $1.63623 * 30 = $49.0869.
Round to the nearest cent: The monthly finance charge would be approximately $49.09.
In order to calculate the finance charge for the current month, you need to multiply the average daily balance by the APR (annual percentage rate) and divide it by 365 (the number of days in a year). Then, round the result to the nearest cent.
Given that Peter's average daily balance is $2,989 and the APR is 20%, we can calculate the finance charge as follows:
Finance charge = ($2,989 * 0.20) / 365
Finance charge = $16.35 (rounded to the nearest cent).