Solve the problem.
-On the July 5 billing date, David had a balance due of $857.86 on his credit card. The transactions During the following month were: $$\begin{array} { l l l }
\text { July } 6 & \text { Payment } & \$ 278.43 \
\text { July 19 } & \text { Charge: auto repair } & \$ 316 \
\text { August } 1 & \text { Charge: clothing } & \$ 157.38
\end{array}$$
The interest rate on the card is 1.8% per month. Using the average daily balance method, find the Finance charge on August 5 (July has 31 days).
A) $14.08
B) $13.89
C) $13.37
D) $13.91

Question

Solve the problem.
-On the July 5 billing date, David had a balance due of $857.86 on his credit card. The transactions During the following month were: $$\begin{array} { l l l } 
\text { July } 6 & \text { Payment } & \$ 278.43 \
\text { July 19 } & \text { Charge: auto repair } & \$ 316 \
\text { August } 1 & \text { Charge: clothing } & \$ 157.38
\end{array}$$
The interest rate on the card is 1.8% per month. Using the average daily balance method, find the Finance charge on August 5 (July has 31 days).
A) $14.08
B) $13.89
C) $13.37
D) $13.91

Quizplus · Accepted Answer

The average daily balance is calculated as follows:(Beginning balance x Number of days in billing cycle + Purchase 1 x Number of days in billing cycle + Purchase 2 x Number of days in billing cycle) / Number of days in billing cycle= (857.86 x 31 + 316 x 12 + 157.38 x 4) / 31= 26,902.86 / 31= 867.83The finance charge is calculated as follows:Finance charge = Average daily balance x Interest rate x Number of days in billing cycle= 867.83 x 0.018 x 31= 13.89Therefore, the correct answer is B) $13.89.

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