The balance on a credit card, that charges a 10.5% APR interest rate, over a 1 month period is given in the following table: Days 1-5: $200 (initial balance) Days 6-20: $350 ($150 purchase) Days 21-30: $150 ($200 payment) What is the finance charge, on the average daily balance, for this card over this 1 month period? finance charge = $ [?] Round to the nearest hundredth. Enter
The balance on a credit card, that charges a 10.5% APR interest rate, over a 1 month period is given in the following table: Days 1-5: $200 (initial balance) Days 6-20: $350 ($150 purchase) Days 21-30: $150 ($200 payment) What is the finance charge, on the average daily balance, for this card over this 1 month period? finance charge = $ [?] Round to the nearest hundredth. Enter
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Understanding Credit Card Finance Charges**
When managing personal finances, it's essential to understand how credit card finance charges are calculated. The following example illustrates a credit card balance over a month with an annual percentage rate (APR) of 10.5%. Below is a breakdown of the balances:
1. **Days 1-5:**
- Balance: $200
- Description: Initial balance
2. **Days 6-20:**
- Balance: $350
- Description: Result of a $150 purchase
3. **Days 21-30:**
- Balance: $150
- Description: After a $200 payment
**Finance Charge Calculation**
The task is to calculate the finance charge on the average daily balance of this credit card for one month:
- **Annual Percentage Rate (APR):** 10.5%
- The finance charge is based on the average daily balance method, which considers each day's balance for a billing cycle.
**Question:**
"Calculate the finance charge on the average daily balance for this card over this 1-month period."
- Enter the finance charge in dollars and round to the nearest hundredth.
By following the instructions and entering the calculated finance charge in the provided field, users can understand how their daily spending and payments influence finance fees.
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