Answer :
To determine Andrew's March finance charge based on a 30-day billing cycle and an APR (Annual Percentage Rate) of 16.60% using the previous balance method, here are the steps that need to be followed:
1. Identify the Previous Balance and APR:
- Previous balance (beginning balance on 3/1): \[tex]$1,794.30 - APR (Annual Percentage Rate): 16.60% 2. Convert APR to a Daily Interest Rate: - Since APR is annual, we convert it to a daily interest rate by dividing it by the number of days in a year (365 days). - \[ \text{Daily Interest Rate} = \frac{\text{APR}}{365} = \frac{16.60\%}{365} = \frac{0.1660}{365} \approx 0.0004548 \] 3. Calculate the Finance Charge: - The finance charge is calculated using the formula: \[ \text{Finance Charge} = \text{Previous Balance} \times \text{Daily Interest Rate} \times \text{Number of Billing Cycle Days} \] - Given the previous balance of \$[/tex]1,794.30 and a billing cycle of 30 days, the finance charge calculation is:
[tex]\[ \text{Finance Charge} = 1794.30 \times 0.0004548 \times 30 \approx 24.48 \][/tex]
4. Select the Correct Answer:
- From the available choices:
- a. \[tex]$46.07 - b. \$[/tex]28.66
- c. \[tex]$21.36 - d. \$[/tex]24.82
- The closest and most accurate answer to our calculated finance charge of approximately \[tex]$24.48 is: - d. \$[/tex]24.82
Therefore, the best answer from the provided choices is [tex]\( \boxed{\$24.82} \)[/tex].
1. Identify the Previous Balance and APR:
- Previous balance (beginning balance on 3/1): \[tex]$1,794.30 - APR (Annual Percentage Rate): 16.60% 2. Convert APR to a Daily Interest Rate: - Since APR is annual, we convert it to a daily interest rate by dividing it by the number of days in a year (365 days). - \[ \text{Daily Interest Rate} = \frac{\text{APR}}{365} = \frac{16.60\%}{365} = \frac{0.1660}{365} \approx 0.0004548 \] 3. Calculate the Finance Charge: - The finance charge is calculated using the formula: \[ \text{Finance Charge} = \text{Previous Balance} \times \text{Daily Interest Rate} \times \text{Number of Billing Cycle Days} \] - Given the previous balance of \$[/tex]1,794.30 and a billing cycle of 30 days, the finance charge calculation is:
[tex]\[ \text{Finance Charge} = 1794.30 \times 0.0004548 \times 30 \approx 24.48 \][/tex]
4. Select the Correct Answer:
- From the available choices:
- a. \[tex]$46.07 - b. \$[/tex]28.66
- c. \[tex]$21.36 - d. \$[/tex]24.82
- The closest and most accurate answer to our calculated finance charge of approximately \[tex]$24.48 is: - d. \$[/tex]24.82
Therefore, the best answer from the provided choices is [tex]\( \boxed{\$24.82} \)[/tex].
