The unpaid balance in an account on November 1 was $125. A payment of $25 was made on November 9. The interest rate per month was 1.65% per month of the average daily balance. Find the finance charge for the month of November.

Question

Quizplus · Accepted Answer

The finance charge can be calculated by first determining the average daily balance. For the first 8 days, the balance was $125, and for the remaining 22 days (assuming November has 30 days), the balance was $100 after the $25 payment. The average daily balance is thus $\frac{(125 \times 8) + (100 \times 22)}{30} = \frac{1000 + 2200}{30} = \frac{3200}{30} = 106.67$. The finance charge is then $106.67 \times 0.0165 = 1.76$, rounding to the nearest cent.

The Unpaid Balance in an Account on November 1 Was