Question

The average daily balance on Sam’s last credit card statement was $587 and he had to pay a finance charge. If the APR is 27.9%, what was his finance charge for the month

Answer 1

Sam's monthly finance charge for a credit card statement with an average daily balance of $587 and an APR of 27.9% would be about $13.65. This is calculated by converting the APR to a monthly rate and multiplying it by the average daily balance.

Step-by-step explanation:

The question asks about calculating the finance charge on a credit card statement with an average daily balance and an annual percentage rate (APR). The calculation for the monthly finance charge can be found by taking the APR, converting it to a monthly rate, and then multiplying it by the average daily balance. The APR of 27.9% must first be converted to a monthly rate by dividing by 12, which gives 2.325%. Then, this monthly rate is applied to the average daily balance of $587 to find the monthly finance charge.

To calculate, use the formula: finance charge = (APR/12) x average daily balance.

So, the monthly finance charge would be:

(27.9% / 12) x $587 = 0.02325 x $587 = $13.65 approximately.

Therefore, Sam's finance charge for the month would be about $13.65.