Question

The balance on a credit card, that charges a 15.5%

apr interest rate, over a 1 month period is given in
the 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 daily
balance, for this card over this 1 month period?
finance charge = $ [?]
round to the nearest hundredth.
entor

Answer 1

The finance charge on the average daily balance for this credit card over a 1-month period is $3.14.

Step-by-step explanation:

To calculate the finance charge on the average daily balance, we need to determine the average balance over the 1-month period and then apply the interest rate.

1. From days 1-3: Balance = $200 x 3 = $600
2. From days 4-20: Balance = $300 x 17 = $5,100
3. From days 21-30: Balance = $150 x 10 = $1,500

Now, let's calculate the average daily balance:

Average Daily Balance = (Total Balance for the month) / (Number of Days in the Month)

Average Daily Balance = ($600 + $5,100 + $1,500) / 30 = $7,200 / 30 = $240

Finally, let's calculate the finance charge:

Finance Charge = (Average Daily Balance) x (APR) x (Number of Days in the Month) / 365

Finance Charge = $240 x 0.155 x 30 / 365 = $3.14 (rounded to the nearest hundredth)

Answer 2

The finance charge on the credit card with a 15.5% APR, considering the varying balances over a month, is calculated to be $5.35 when rounded to the nearest hundredth.

Step-by-step explanation:

To calculate the finance charge on an average daily balance, we need to first find the average daily balance for the credit card over the one month period. The balance for days 1-3 is $200, for days 4-20 is $300, and for days 21-30 is $150. The average daily balance is calculated by multiplying each balance by the number of days it was the balance and then dividing by the total number of days in the period. Then, we use the formula: Finance charge = Average daily balance × (APR/365) × number of days in billing cycle to calculate the finance charge.

Here, the average daily balance would be:
(($200 × 3) + ($300 × 17) + ($150 × 10)) ÷ 30 = $6,000 + $5,100 + $1,500) ÷ 30 = $12,600 ÷ 30 = $420

The monthly finance charge at 15.5% APR over a 30-day period would be calculated as follows:
Finance charge = $420 × (0.155/365) × 30
Finance charge = $420 × 0.000424658 × 30
Finance charge = $420 × 0.01273973
Finance charge = $5.35 (rounded to the nearest hundredth)