find the interest charged for a credit card based on an average daily balance (adb) of $6,803.41, an annual…
find the interest charged for a credit card based on an average daily balance (adb) of $6,803.41, an annual interest rate of 14.9%, and a billing cycle of 28 days. round to the nearest cent.
Answer
Explanation:
Step1: Convert annual rate to daily rate
The annual interest rate is $14.9%=0.149$. The daily - interest rate $r$ is calculated by dividing the annual interest rate by 365. So $r=\frac{0.149}{365}$.
Step2: Calculate the interest
The formula for simple interest is $I = P\times r\times t$, where $P$ is the principal amount (average daily balance), $r$ is the daily interest rate, and $t$ is the number of days in the billing cycle. Here, $P = 6803.41$, $r=\frac{0.149}{365}$, and $t = 28$. [ \begin{align*} I&=6803.41\times\frac{0.149}{365}\times28\ &=6803.41\times0.149\times\frac{28}{365}\ &=6803.41\times0.149\times0.0767123\ &=6803.41\times0.0113301\ &= 76.09 \end{align*} ]
Answer:
$76.09$