On October 1st Joe charged $900 to his credit card,on October 10th he charged another $1,300 to his credit card,and on October 15th he charged an additional $100.His credit card charges him an Annual Percentage Rate (APR)of 18% compounded monthly.Using the Average Daily Balance Method calculate Joe's finance charge for the month of October.

Question

Quizplus · Accepted Answer

To use the Average Daily Balance Method, we need to calculate the average daily balance for the month of October.

Average Daily Balance = (Total balance on each day / Number of days in the billing cycle)

October has 31 days, so:

Average Daily Balance = [(900 x 1) + (1300 x 6) + (100 x 15)] / 31 = $730.65

To calculate the finance charge, we need to multiply the Average Daily Balance by the monthly periodic rate (APR / 12) and the number of days in the billing cycle:

Finance Charge = Average Daily Balance x (APR / 12) x Number of Days

Finance Charge = $730.65 x (0.18 / 12) x 31 = $28.16

Therefore, the finance charge for Joe's credit card in October is $28.16. The best choice is B.

On October 1st Joe Charged $900 to His Credit Card,on