Complete question:
Terry has a credit card that uses the average daily balance method. For the first 18 days of one of his billing cycles, his balance was $350, and for the last 12 days of the billing cycle, his balance was $520. If his credit card's APR is 14%, which of these expressions could be used to calculate the amount Terry was charged in interest for the billing cycle?
(0.14/365 31)(18 $350 + 12 $520 / 31)
(0.14/365 30)(18 $350 + 12 $520 / 30)
(0.14/365 30)(12 $350 + 18 $520 / 30)
(0.14/365 31)(12 $350 + 18 $520 / 31)
Answer:
(0.14/365 30)(18 $350 + 12 $520 / 30)
Step-by-step explanation:
Number of days in a year = 365
Number of days in billing cycle = (18 + 12) = 30
Interest rate per year = 14% = 0.14
Amount charged monthly :
(Monthly rate × average daily balance)
MONTHLY RATE:
(Annual interest / number of days in year) * days in billing cycle
(0.14 / 365) × 30
Average daily balance :
First 18 days ; balance = $350
Last 12 days ; balance = $520
Sum of balance / days in billing cycle
[(18 × $350) + (12 × 520)] / 30
THEREFORE, MONTHLY INTEREST CHARGE :
((0.14 / 365) × 30) ((18 × $350) + (12 × 520) / 30)
