Question

Calvin’s credit card computes finance charges using the daily balance method. His card has a billing cycle of 30 days and an APR of 14. 75%. The following table details Calvin’s transactions in the month of September. Date Amount ($) Transaction 9/1 716. 54 Beginning balance 9/7 84. 94 Purchase 9/12 15. 69 Purchase 9/20 200. 00 Payment What will Calvin’s starting balance be next month? a. $617. 17 b. $624. 74 c. $625. 91 d. $623. 52.

Answer 1

c. $625. 91

Explanation:

The average daily balance totals each day's balance for the billing cycle and divides by the total number of days in the billing cycle. Then, the balance is multiplied by the monthly interest rate to assess the customer's finance charge—dividing the cardholder's APR by 12 calculates the monthly interest rate.