Sam has an account with a department store. His daily balance
for the first 12 days of April was $125.47. His daily balance for
the next 5 days was $151.25. For the last 13 days it was $177.63.
What was his finance charge if the store used a rate of 2%?
a. $2.26
b. $3.05
c. $1.51
d. $91.42
To calculate the finance charge, we first need to find the average daily balance for the entire month of April:
Average daily balance = (12 days x $125.47) + (5 days x $151.25) + (13 days x $177.63) / 30 days
Average daily balance = $150.34
Next, we calculate the finance charge using the formula:
Finance charge = Average daily balance x Annual rate x Number of days in billing cycle / Number of days in year
In this case, the annual rate is 2%, the number of days in the billing cycle is 30, and the number of days in a year is 365:
Finance charge = $150.34 x 0.02 x 30 / 365
Finance charge = $2.46
Therefore, the closest option to the finance charge is (a) $2.26.