AnswersFowU - Financial Math - BFinance ChargesQuestion 8
8
QuizMultiple Choice

Finance Charges

Question 8 • FowU - Financial Math - B

Jennifer has a credit card with an APR of 10.22% and a billing cycle of 30 days. The following table shows Jennifer’s credit card transactions in the month of January.DateAmount ($)Transaction1/1807.94Beginning balance1/741.81Purchase1/853.88Payment1/1675.00Purchase1/2018.65Purchase1/2625.00PaymentHow much greater will Jennifer’s January finance charge be if the finance charge is calculated using the previous balance method than if it is calculated using the adjusted balance method?

Answer
A
$0.48
B
$1.15
C
$0.67
D
$0.85

Explanation

The monthly rate is 10.22% ÷ 12 = 0.0085167. Under the previous balance method, the balance used is $807.94; under the adjusted balance method, subtract the $53.88 and $25.00 payments, giving $729.06. The difference in finance charges is ($807.94 − $729.06) × 0.0085167 ≈ $0.67, so the answer is choice C, $0.67.

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