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The balance on a credit card, that charges a 20% 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.

Respuesta :

sqdancefan

Answer:

  $4.00

Step-by-step explanation:

You want the finance charge on the average daily balance of a credit card with a 20% APR and a balance of $200 for 3 days, $300 for 17 days, and $150 for 10 days.

Average daily balance

The average daily balance (ADB) is the sum of products of daily balance and number of days, divided by the total number of days:

  [tex]ADB=\dfrac{\$200\times3+\$300\times17+\$150\times10}{3+17+10}=\dfrac{\$7200}{30}=\$240[/tex]

Finance charge

The finance charge is the product of the ADB and the monthly interest rate. That rate is the APR divided by 12.

 

  finance charge = 0.20/12 × $240 = $4.00

The finance charge for the given 1 month period is $4.00.

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Additional comment

You can count the days, {1, 2, 3} for example, or subtract the first day number from the last and add 1: 3 -1 =2; 2 +1 = 3. The balance of $200 on days 1–3 mean that balance is weighted by 3 days.

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