Nic has a revolving dept store credit card account with rate 15%annually. Lastmonth balance on the account was $423.78. During the current month, he made purchases totalling $123.42 and made a payment of $100.00. The store uses the unpaid balance method. What must be the amt of balance charge, rounded to nearest cent. a. $5.30 b. $4.59 c. $6.36 d. $6.71
To calculate the balance charge on the credit card account, we need to first determine the average daily balance (ADB) for the current month. Then we can use the ADB and the annual interest rate to calculate the balance charge.
To find the ADB, we can calculate the daily balance for each day of the month and then sum them up and divide by the number of days in the month.
1. Subtract the payment made from the previous balance:
Previous balance - Payment = $423.78 - $100.00 = $323.78
2. Add the purchases made during the current month to the resulting balance from the previous step:
Balance + Purchases = $323.78 + $123.42 = $447.20
3. Calculate the average daily balance by dividing the resulting balance by the number of days in the month. (Assuming a 30-day month for simplicity):
Average daily balance = $447.20 / 30 = $14.91
Now that we have the ADB, we can calculate the balance charge. Using the unpaid balance method, we multiply the ADB by the annual interest rate and divide by 365 (the number of days in a year) to get the daily interest charge:
Daily interest charge = (Average daily balance * Annual interest rate) / 365
= ($14.91 * 0.15) / 365
≈ $0.006123 (rounded to the nearest cent)
Finally, we can multiply the daily interest charge by the number of days in the month to get the balance charge for the month:
Balance charge = Daily interest charge * Number of days in the month
= $0.006123 * 30
≈ $0.1837 (rounded to the nearest cent)
Therefore, the rounded balance charge for the month is $0.18.
None of the options given match the calculated balance charge. It appears to be a missing or incorrect option.