Question

The balance on a credit card, that charges a 15.5%APR interest rate, over a 1 month period is given inthe following table:Days 1-3:$200 (initial balance)Days 4-20: $300 ($100 purchase)Days 21-30: $150 ($150 payment)What is the finance charge, on the average dailybalance, for this card over this 1 month period?finance charge = $ [?]Round to the nearest hundredth.

Answer 1

$3.10

Explanation:

You want to know the finance charge on the average daily balance if the charge is 15.5% per year, and the balances were $100 for 3 days, $300 for 17 days, and $150 for 10 days.

Average daily balance

The average daily balance is the sum of daily balances, divided by the total number of days:

adb = (3×200 +17×300 +10×150)/(3+17+10) = 7200/30 = 240

Finance charge

The finance charge is ...

(r/12)(adb) = (0.155/12)(240) = 3.10

The finance charge is $3.10.

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