yolandas credit card has an apr of 16.22% and a billing cycle of 30 days. the table below shows her…

yolandas credit card has an apr of 16.22% and a billing cycle of 30 days. the table below shows her transactions with that credit card in the month of november.\n| date | amount ($) | transaction |\n| ---- | ---- | ---- |\n| 11/1 | 857.14 | beginning balance |\n| 11/3 | 76.95 | purchase |\n| 11/10 | 50.00 | payment |\n| 11/24 | 43.19 | purchase |\nfind yolandas finance charge in november using the previous balance method, the adjusted balance method, and the daily balance method. among those three possible finance charges, what is the value of the one which is neither lowest nor highest?\na. $12.53\nb. $11.59\nc. $12.05\nd. $10.91

yolandas credit card has an apr of 16.22% and a billing cycle of 30 days. the table below shows her transactions with that credit card in the month of november.\n| date | amount ($) | transaction |\n| ---- | ---- | ---- |\n| 11/1 | 857.14 | beginning balance |\n| 11/3 | 76.95 | purchase |\n| 11/10 | 50.00 | payment |\n| 11/24 | 43.19 | purchase |\nfind yolandas finance charge in november using the previous balance method, the adjusted balance method, and the daily balance method. among those three possible finance charges, what is the value of the one which is neither lowest nor highest?\na. $12.53\nb. $11.59\nc. $12.05\nd. $10.91

Answer

Explanation:

Step1: Calculate monthly interest rate

The APR is 16.22%, so the monthly interest rate $r=\frac{16.22%}{12}=\frac{0.1622}{12}\approx 0.013517$.

Step2: Previous - balance method

The previous - balance is the beginning balance. Finance charge $FC_{1}=857.14\times0.013517\approx11.59$.

Step3: Adjusted - balance method

The adjusted balance is the beginning balance plus purchases minus payment. Adjusted balance $AB = 857.14+76.95 + 43.19-50=927.28$. Finance charge $FC_{2}=927.28\times0.013517\approx12.53$.

Step4: Daily - balance method

1 - 2 days: balance = 857.14, balance - days = $857.14\times2 = 1714.28$ 3 - 9 days: balance = $857.14 + 76.95=934.09$, balance - days=$934.09\times7 = 6538.63$ 10 - 23 days: balance = $934.09-50 = 884.09$, balance - days=$884.09\times14 = 12377.26$ 24 - 30 days: balance = $884.09+43.19 = 927.28$, balance - days=$927.28\times7 = 6490.96$ Total balance - days=$1714.28+6538.63+12377.26+6490.96 = 27121.13$ Average daily balance $ADB=\frac{27121.13}{30}\approx904.04$. Finance charge $FC_{3}=904.04\times0.013517\approx12.22$.

Step5: Compare the finance charges

$FC_{1}\approx11.59$, $FC_{2}\approx12.53$, $FC_{3}\approx12.22$. The middle - value is 12.22 which is closest to 12.05.

Answer:

c. $12.05$