Estimate the answer by picking the best choice without calculating. If your credit card balance is $932, you make a $50 payment, the APR is 12%, and the interest is calculated according to the adjusted balance method, then the finance charge is
A) $9.32
B) $8.82
C) $8.85 __________ (Enter A, B, or C )

Question

Estimate the answer by picking the best choice without calculating. If your credit card balance is $932, you make a $50 payment, the APR is 12%, and the interest is calculated according to the adjusted balance method, then the finance charge is
A) $9.32 
B) $8.82 
C) $8.85 __________ (Enter A, B, or C )

Quizplus · Accepted Answer

To estimate the finance charge, we can assume that the adjusted balance method charges interest on the average of the beginning and ending balances after the payment. So the average balance would be around $441 ($932 + $0 / 2 - $50). Multiplying this by the APR of 12% gives us an estimate of $52.92 for the annual interest. Dividing this by 12 months gives us an estimate of $4.41 for the monthly interest. Rounding this to the nearest cent gives us an estimated finance charge of $8.82. Therefore, the best choice is B.

Estimate the Answer by Picking the Best Choice Without Calculating