BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What is the monthly finance charge if the average daily balance is $30, the daily periodic rate is 0.07%, and the number of days in the cycle is 30?
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63¢
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90¢
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21¢
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Explanation:
Detailed explanation-1: -Divide the interest rate by 100 and then by 365. Multiply the result by the credit card balance: ((20 / 100) / 365) × 1000. We obtain the result $0.547. That’s your daily finance charge.
Detailed explanation-2: -Average daily balance is calculated by adding each day’s balance and then dividing the total by the number of days in the billing cycle. That number multiplied by one-twelfth your annual percentage rate, or APR, equals your monthly finance charge. This is considered the most common method.
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