Saul has an account with a department store. His daily balance
for the first 11 days of April was $225. His daily balance for
the next 6 days was $262.22. For the last 14 days it was $297.33.
What was his finance charge if the store used a rate of 2%?
a. $5.10
b. $264.87
c. $5.30
d. $.51
To calculate the finance charge, we need to find out the average daily balance for the billing cycle.
For the first 11 days, the daily balance was $225, so the total balance for those days was:
11 x $225 = $2475
For the next 6 days, the daily balance was $262.22, so the total balance for those days was:
6 x $262.22 = $1573.32
For the last 14 days, the daily balance was $297.33, so the total balance for those days was:
14 x $297.33 = $4162.62
To find the average daily balance, we add up the total balances for each period and divide by the number of days in the billing cycle:
($2475 + $1573.32 + $4162.62) / 31 = $261.64
Now we can calculate the finance charge using the interest rate of 2%:
$261.64 x 0.02 = $5.23
Rounding to the nearest cent, the answer is: c. $5.30