12 On the September 1 billing date Mario had a balance due o

12) On the September 1 billing date, Mario had a balance due of $585 on his credit card. The transactions during the following month were: September 5 Payment September 13 Charge: dinner September 22 Charge: movie tickets $25 September 29 Charge: gas $150 $65 $42 The interest rate on the card is 1.6% per month. Using the average daily balance method, find the finance charge on October 1 (September has 30 days). (6 points)

Solution

1.6% per month = 1.6%/30 = 0.0534%

Thus Sept 1 to Sept 4 = $585 x 0.0534% x 4 = 1.25
Sept 5 to Sept 12 = ($585+$150) x 0.0534% x 8 = 3.14
Sept 13 to Sept 21 = ($585+$150+$65) x 0.0534% x 9 = 3.844
Sept 22 to Sept 28 = ($585+$150+$65+$25) x 0.0534% x 7 = 3.08
Sept 29 to Sept 30 = ($585+$150+$65+$25+$42) x 0.0534% x 2 = 0.9259

Thus Finance charge on Oct 1 = $1.25+$3.14+$3.844+$3.08+$0.9259
                                              = $12.2399