The unpaid balance in an account on December 1 was $145. A payment of $60 was made on December 14. The interest rate per month was 1.7% per month of the average daily balance. Find the finance charge for the month of December.

Question

Quizplus · Accepted Answer

To find the average daily balance for the month of December, we need to divide the total balance by the number of days in the month:
Average daily balance = (Total balance - Payment made) / Number of days
= ($145 - $60) / 31
= $2.74
The finance charge for the month can be found by multiplying the average daily balance by the interest rate per month:
Finance charge = Average daily balance x Interest rate per month
= $2.74 x 1.7% = $0.04658
= $1.87 (rounded to the nearest cent)
Therefore, the best choice is (C) $1.87.

The Unpaid Balance in an Account on December 1 Was