Nick has a revolving department store credit card account with an annual percentage rate of 15%. Last month’s balance on the account was $423.78. During the current month, he made pur- chases totaling $123.42 and made a payment of $100. The store uses the unpaid balance method. According to this information, what must be the amount of the finance charge?

Question

Nick has a revolving department store credit card account with an annual percentage rate of 15%. Last month’s balance on the account was $423.78. During the current month, he made pur- chases totaling $123.42 and made a payment of $100. The store uses the unpaid balance method. According to this information, what must be the amount of the finance charge?

A. $5.30
B. $5.59
C. $6.36
D. $6.71

Answer 1

Bal. = 423.78 + 123.42 - 100 = 447.20

Int. = 447.20 *(0.15/12) * 1 = $5.59

Answer 2

To calculate the finance charge using the unpaid balance method, you need to consider the average daily balance and the number of days in the billing cycle.

First, calculate the average daily balance for the billing cycle:
1. Start with the previous balance: $423.78
2. Subtract any payments made during the month: $423.78 - $100 = $323.78
3. Add any purchases made during the month: $323.78 + $123.42 = $447.20
4. Divide the total by the number of days in the billing cycle. Let's assume there are 30 days in the billing cycle for this example.

Average daily balance = $447.20 / 30 = $14.91 (rounded to the nearest cent)

Now, calculate the finance charge using the annual percentage rate (APR):
1. Convert the APR to a daily interest rate: 15% / 365 = 0.0411% (rounded to four decimal places)
2. Multiply the average daily balance by the daily interest rate: $14.91 * 0.0411% = $0.0061

Finally, multiply the daily interest by the number of days in the billing cycle:
$0.0061 * 30 = $0.183 (rounded to the nearest cent)

Therefore, the amount of the finance charge is $0.18.

The correct option is not listed among the answer choices provided.