Question

• Finance Charge: $4.87 and New Balance: $236.93

• Finance Charge: $4.87 and New Balance: $336.93
• Finance Charge: $6.87 and New Balance: $236.93
• Finance Charge: $6.87 and New Balance: $336.93

Which one is correct?

Answer 1

The correct one is "Finance Charge: $4.87 and New Balance: $236.93."

How did we arrive at this assertion?

Let's calculate the finance charge using the average daily balance method:

Finance Charge = Average Daily Balance * Daily Periodic Rate * Number of Days

Finance Charge = $273.03 * 0.000575 * 31

Finance Charge ≈ $4.87

Now, to calculate the new balance, add the finance charge to the total of the previous balance, purchases, and fees, and then subtract the total payments:

`\[ \text{New Balance} = (\text{Previous Balance} + \text{Purchases} + \text{Fees}) - \text{Payments} \]`

`\[ \text{New Balance} = ($89.27 + $159.34 + $108.45 + $25.00) - $150.00 + \text{Finance Charge} \]`

`\[ \text{New Balance} = $382.06 - $150.00 + $4.87 \]`

`\[ \text{New Balance} = $236.93\]`

So, the correct answer is:

• Finance Charge: $4.87 and New Balance: $236.93