Find the finance charge for the given charge account provided in the table. Assume interest is calculated on the average daily balance of the account.

\begin{tabular}{c|c}
\begin{tabular}{c}
Average Daily \\
Balance
\end{tabular} & \begin{tabular}{c}
Monthly Interest \\
Rate
\end{tabular} \\
\hline
[tex]$\$[/tex] 418.37[tex]$ & $[/tex]1.44 \%[tex]$
\end{tabular}

The finance charge for the given charge account is $[/tex]\[tex]$[/tex] [tex]$\square$[/tex] (Round to the nearest cent as needed.)



Answer :

To find the finance charge for the given charge account using the average daily balance method, follow these steps:

1. Identify the average daily balance: According to the provided information, the average daily balance is [tex]$418.37. 2. Identify the monthly interest rate: The monthly interest rate given is 1.44%. 3. Convert the monthly interest rate from a percentage to a decimal: To do this, divide the percentage by 100. \[ \text{Monthly Interest Rate (decimal)} = \frac{1.44}{100} = 0.0144 \] 4. Calculate the finance charge: Multiply the average daily balance by the monthly interest rate in decimal form. \[ \text{Finance Charge} = 418.37 \times 0.0144 = 6.024528 \] 5. Round the finance charge to the nearest cent: Since the finance charge should be expressed in dollars and cents, round 6.024528 to two decimal places. \[ \text{Finance Charge (rounded)} = 6.02 \] Therefore, the finance charge for the given charge account is $[/tex]6.02.

[tex]\[ \boxed{6.02} \][/tex]