nick has a revolving department store credit card account with an annual percentage rate of 15% last month's balance on the account was $423.78
during the current month he made purchases totaling $123.42 and he made a payment of $100.00 the store uses the unpaid balance method. According to this info what must be the amount of the finance charge ? answer needs to be rounded to the nearest cent
The unpaid balance of the previous bill was $323.78. 15% annual interest on that amount results in a current-month finance charge of $4.05.
thanks for the help I am still not quite sure the choices I have to pick from are
$5.30 $6.36
$5.59 $ 6.71
The previous blance $323.78 15% annual interest finance charge would be $4.05
need to round answer to the nearest cent
To calculate the finance charge using the unpaid balance method, you need to follow these steps:
1. Calculate the Average Daily Balance (ADB) for the billing cycle.
- Start with the previous month's balance: $423.78
- Add each day's purchase to the balance: $423.78 + $123.42 = $547.20
- Subtract any payments made during the billing cycle: $547.20 - $100.00 = $447.20
- Divide the total balance by the number of days in the billing cycle (usually 30): $447.20 / 30 = $14.91 (rounded to the nearest cent)
2. Calculate the Monthly Finance Charge.
- Multiply the ADB by the monthly interest rate: $14.91 * (15% / 12) = $0.186375
- Round the result to the nearest cent: $0.19
Therefore, the amount of the finance charge for the current month must be $0.19.