Calculate the interest on a $1700 credit card bill that shows a 22% APR, using the average daily balance method. Assume you sent a payment of $375 on the first day of a month that has 30 days and it takes 5 days for this payment to be received and recorded. Round to the nearest penny.
Calculate the interest on a $1700 credit card bill that shows a 22% APR, using the average daily balance method. Assume you sent a payment of $375 on the first day of a month that has 30 days and it takes 5 days for this payment to be received and recorded. Round to the nearest penny.
a.$27.04
b.$25.09
c.$28.56
d.$28.60
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I just can't figure this question out...... please help!
I get the answe 30.73 but it is not the right answer. I did this.
1700 x 0.22 x 30/365= 30.73
remeber you find intetrist in a year
basis so if you change 30 to 1/12 than you will get your answer
you mean 1700x0.02x1/12=31.16?
that is not the right answer though :(
To calculate the interest on a credit card bill using the average daily balance method, you need to follow a few steps. Let's break it down:
Step 1: Determine the average daily balance
To calculate the average daily balance, you need to consider the balance of the credit card over the course of the billing cycle. In this case, you made a payment of $375 on the first day of the month, and it took 5 days to be received and recorded. This means that for the first 5 days of the billing cycle, your balance was $1700 (the original balance).
From day 6 until the end of the month, your balance would be $1700 (original balance) - $375 (payment) = $1325.
So, the average daily balance would be:
(5 days x $1700) + (25 days x $1325) = $86,375
Step 2: Calculate the monthly interest rate
To calculate the monthly interest rate, you need to divide the annual percentage rate (APR) by 12. In this case, the APR is 22%.
Monthly interest rate = 22% / 12 = 1.83%
Step 3: Calculate the interest charge
To calculate the interest charge, multiply the average daily balance by the monthly interest rate.
Interest charge = $86,375 x 1.83% = $1,580.5525 (unrounded)
Step 4: Round to the nearest penny
The question asks you to round the answer to the nearest penny. To do this, you can either round up or down based on the value after the decimal point.
In this case, the value after the decimal point is 0.5525. Since it's greater than or equal to 0.5, you should round up.
Rounded interest charge = $1,580.56
So, the correct answer from the given options is c) $28.56.
Note: The calculation you provided (1700 x 0.22 x 30/365) does not consider the effect of the payment made or the average daily balance method. It only calculates the interest based on the APR and the given initial balance, which is not accurate for this scenario.