Question

the following table shows the balance on a credit card over the period of 1 month, that charges a 18% apr (interest rate).

days	balance	description
6 - 20	$350	$150 purchase
21 - 30	$150	$200 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 product

For 1 - 5 days: $200 * 5 = 1000$
For 6 - 20 days: $350 * 15 = 5250$ (since 20 - 6 + 1 = 15 days)
For 21 - 30 days: $150 * 10 = 1500$ (since 30 - 21 + 1 = 10 days)
Total = $1000 + 5250 + 1500 = 7750$

Step2: Find average daily balance

Average daily balance = $\frac{7750}{30} \approx 258.333...$

Step3: Calculate monthly interest rate

APR is 18%, so monthly rate = $\frac{0.18}{12} = 0.015$

Step4: Compute finance charge

Finance charge = $258.333... * 0.015 \approx 3.875$

Answer:

$\$3.88$ (rounded to nearest cent)