nick has a revolving store credit card account an annual percentage rate of 15%.last months balance was 423.78.during the current month, he purchase totaling 123.42 and made a payment of 100.the store uses the unpaid balance method.what is the amount of the finance charge
BAL. = 423.78+123.42-100 = 447.20.
Int. = 447.20 * (0.15/12) = 5.59.
To calculate the finance charge using the unpaid balance method, we need to follow these steps:
1. Subtract the payment made during the current month from the balance at the beginning of the month:
Balance at the beginning of the month = $423.78
Payment made = $100
New balance = $423.78 - $100 = $323.78
2. Add the purchases made during the current month to the new balance:
Purchases made = $123.42
New balance = $323.78 + $123.42 = $447.20
3. Determine the average daily balance for the current month. Since we don't have information about the number of days in the billing cycle, we will assume a 30-day billing cycle for simplicity:
Average daily balance = (New balance * Number of days in the billing cycle) / Number of days in a year
= ($447.20 * 30) / 365
= $36.79
4. Calculate the finance charge using the average daily balance and the annual percentage rate (APR):
Finance charge = Average daily balance * (APR / 365)
= $36.79 * (15% / 365)
= $0.02 (rounded to two decimal places)
Therefore, the amount of the finance charge for the current month is approximately $0.02.
To calculate the finance charge using the unpaid balance method, we need to follow these steps:
1. Determine the average daily balance for the billing cycle. The average daily balance is calculated by taking the sum of each day's balance and dividing it by the number of days in the billing cycle.
2. Calculate the daily periodic rate. This is the annual percentage rate (APR) divided by 365 (the number of days in a year).
3. Multiply the average daily balance by the daily periodic rate to get the daily finance charge.
4. Multiply the daily finance charge by the number of days in the billing cycle to get the total finance charge for the month.
Now let's apply these steps to the given information:
- Last month's balance: $423.78
- Purchases during the current month: $123.42
- Payment made during the current month: $100
- APR: 15%
- Billing cycle: We need to know the number of days in the billing cycle to complete the calculation.
Assuming a 30-day billing cycle, we can now calculate the finance charge:
Step 1: Average daily balance calculation:
Last month's balance: $423.78
Purchases during the current month: $123.42
Payment made during the current month: -$100 (minus sign because it's a payment)
Average daily balance = (Last month's balance + Purchases - Payments) / Number of days in the billing cycle
Average daily balance = ($423.78 + $123.42 - $100) / 30 = $447.20 / 30 = $14.91
Step 2: Daily periodic rate calculation:
APR = 15%
Daily periodic rate = APR / 365 = 0.15 / 365 = 0.00041096
Step 3: Daily finance charge calculation:
Daily finance charge = Average daily balance * Daily periodic rate
Daily finance charge = $14.91 * 0.00041096 = $0.00612 (rounded to 5 decimal places)
Step 4: Total finance charge calculation:
Total finance charge = Daily finance charge * Number of days in the billing cycle
Total finance charge = $0.00612 * 30 = $0.1836 (rounded to 2 decimal places)
Therefore, the amount of the finance charge for Nick's revolving store credit card account is approximately $0.18.