Question

Calculate the monthly finance charge if the average daily balance is $20, the daily periodic rate is 0.05%, and the number of days in the cycle is 30.

a) 30 cents.
b) 31 cents.
c) 50 cents.

Answer 1

30 cents

Explanation:

To calculate the remaining balance we must calculate how much money must be paid per day. We can determine this using the average daily rate of 0.05% and the daily balance. Then we can multiply this with the amount of days in the cycle.

`=20*0.0005*30=0.3`

Therefore the monthly finance charge is 30 cents

Answer 2

To solve the problem above, we must first find the daily finance charge and multiply it by 30, for the number of days in the month cycle is 30. 0.05% or 0.0005 times $20 is $ 0.01, or 1 cent. Multiply that by 30 to get the monthly finance charge which is, 0.01 x 30 = $ 0.30 or 30 cents. The Answer is A. 30 cents.