Question

The average daily balance of a credit card for the month of May was $1,200, and the unpaid balance at the end of the month was $1,000. If the annual percentage rate is 16.8% of the average daily balance, what is the total balance on the next billing date June 1? Round your answer to the nearest cent.

Answer 1

To find the total balance on June 1, the monthly interest rate of 1.4% is applied to the average daily balance of $1,200 to calculate the interest charge of $16.80, which is then added to the unpaid balance of $1,000 to arrive at a total of $1,016.80.

Step-by-step explanation:

The question asks us to calculate the total balance on the next billing date, June 1, given the average daily balance, unpaid balance at the end of the month, and the annual percentage rate (APR). To do this, we need to apply the APR to the average daily balance to find the interest for one month.

The APR is 16.8%, but since we need the monthly rate we divide by 12 (months in a year), which gives us 16.8% / 12 = 1.4% per month. Subtracting 100% (the whole balance) from 101.4% gives us 1.4% which represents the interest for that month on the average daily balance. To find the monthly interest charged, we compute 1.4% of $1,200:

Monthly Interest = (1.4 / 100) * $1,200 = $16.80

The interest for the month is added to the unpaid balance to find the total balance on June 1:

Total Balance = Unpaid Balance + Interest = $1,000 + $16.80 = $1,016.80

Answer 2

Given

Unpaid balance for the month of may = $1,000

Average daily balance = $1,200

Annual interest = 16.8%

=> Monthly Interest = 16.8/12 = 1.4%

Find

Total balance on the next billing date June 1

Explanation

Finance charge = (Monthly Interest rate) x (Average day balance)

= 1.4% x 1200 = $ 16.8

So total Balance on next billing date

= (unpaid balance + Finance charge) x (number of days)

= (1000 + 16.8) x (31)

= (1016.8) x (31)

= $31520.8

Final Answer

$31520.8 is the total balance on next billing date June 1