A charge account had a balance of $972 on May 5. A purchase of $223 was made on May 17, and a payment of $125 was made on May 20. The interest on the average daily balance is 1.6% per month. Find the finance charge on the June 5 bill. (Round your answer to the nearest cent.)
Question
A charge account had a balance of 223 was made on May 17, and a payment of $125 was made on May 20. The interest on the average daily balance is 1.6% per month. Find the finance charge on the June 5 bill. (Round your answer to the nearest cent.)
Solution
To solve this problem, we need to calculate the average daily balance for the month, and then apply the monthly interest rate to find the finance charge.
Step 1: Calculate the daily balance for each period.
- From May 5 to May 16 (12 days), the balance was $972.
- From May 17 to May 19 (3 days), the balance was 223 = $1195.
- From May 20 to June 4 (16 days), the balance was 125 = $1070.
Step 2: Calculate the sum of the daily balances.
- For the first period: 11664
- For the second period: 3585
- For the third period: 17120
The sum of these amounts is 3585 + 32369.
Step 3: Calculate the average daily balance.
The average daily balance is the sum of the daily balances divided by the number of days in the billing cycle. In this case, the billing cycle is from May 5 to June 4, which is 31 days.
So, the average daily balance is 1044.16.
Step 4: Calculate the finance charge.
The finance charge is the average daily balance multiplied by the monthly interest rate. The monthly interest rate is 1.6%, or 0.016.
So, the finance charge is 16.71.
Therefore, the finance charge on the June 5 bill is $16.71.
Similar Questions
Calculate the finance charge for a credit card that has the given average daily balance and interest rate. (Round your answer to the nearest cent.)Average daily balance: $113.31; monthly interest rate: 1.55%
A bank bill with a face value of $250,000 was issued today and it matures in 60 days' time. If interest rates are 4.5% p.a. what amount of cash does the issuer receive today? Group of answer choices $239,234.45 $251,849.32 $250,000.00 $1,835.74 $248,164.26
A company borrows money as needed on the first day of the month and repays principal and interest on the last day of the budget period, if cash is available. For the second quarter of the year, they borrowed $10,000 in April, $8,000 in May and $5,000 in June. The interest rate is 1% per month. Assuming enough money is available on June 30th to repay the debt, the total amount of interest due is Blank______.Multiple choice question.$560$230$690
Find the simple interest I of the given loan amount. (Round your answers to the nearest cent.)(a) $5,676 borrowed at 1134% from July 1 to December 31 of the same yearI =
Today is your 21st birthday and your bank account balance is $25,000. Your account is earning 6.5% interest compounded quarterly. How much will be in the account on your 50th birthday?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.