Find the finance charge on the revolving charge account. Assume interest is calculated on the unpaid balance of the account. Round to the nearest cent.
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Question

Quizplus · Accepted Answer

To find the finance charge, we need to calculate the interest on the unpaid balance of the account. We can see from the statement that the beginning balance was $2,000, but there were various payments and purchases made throughout the month. To calculate the unpaid balance, we need to subtract the payments and credits from the purchases and beginning balance:

Unpaid balance = beginning balance + purchases - payments - credits
Unpaid balance = $2,000 + $1,690.75 - $1,740 - $250
Unpaid balance = $1,700.75

Now, we can calculate the interest on the unpaid balance. The statement tells us that the APR is 17% and that interest is calculated daily. To calculate the daily interest rate, we divide the APR by 365:

Daily interest rate = 17% / 365 = 0.04658%

To calculate the monthly finance charge, we multiply the daily interest rate by the average daily balance:

Average daily balance = (beginning balance + ending balance) / 2
Ending balance = $991.80 + $489.95 + $656.15 + $226.90 = $2,364.80
Average daily balance = ($2,000 + $2,364.80) / 2 = $2,182.40

Monthly finance charge = daily interest rate x average daily balance x number of days in the billing cycle
Number of days in billing cycle = 31
Monthly finance charge = 0.0004658 x $2,182.40 x 31
Monthly finance charge = $41.67

Therefore, the finance charge on the revolving charge account is $41.67, which corresponds to choice (D).

Find the Finance Charge on the Revolving Charge Account