Question

the following table shows the balance on a credit card over the period of 1 month, that charges a 12% apr (interest rate).

days	balance	description
4 - 20	$300	$100 purchase
21 - 30	$150	$150 payment

what is the finance charge, on the average daily balance, for this card over this 1 month period?
finance charge = $?
round to the nearest cent.

Explanation:

Step1: Calculate total balance days

For 1 - 3 days: $3$ days, balance $\$200$. Total: $3\times200 = 600$
For 4 - 20 days: $20 - 4 + 1 = 17$ days, balance $\$300$. Total: $17\times300 = 5100$
For 21 - 30 days: $30 - 21 + 1 = 10$ days, balance $\$150$. Total: $10\times150 = 1500$

Step2: Find average daily balance

Total balance - days: $600 + 5100 + 1500 = 7200$
Total days: $3 + 17 + 10 = 30$
Average daily balance: $\frac{7200}{30} = 240$

Step3: Calculate monthly interest rate

APR is 12%, so monthly rate: $\frac{12\%}{12} = 1\% = 0.01$

Step4: Compute finance charge

Finance charge: $240\times0.01 = 2.4$

Answer:

$\$2.40$