To find the finance charge on the June 5 bill, we’ll calculate the average daily balance from May 5 to June 5 and then apply the 1.7% monthly interest rate to that balance.

Step 1: Calculate the average daily balance

Time Periods and Balances

1. May 5 – May 17 (12 days):
   Balance = $940

2. May 17 – May 20 (3 days):
   Balance = $940 + $230 = $1170

3. May 20 – June 5 (16 days):
   Balance = $1170 - $150 = $1020

Calculate the Average Daily Balance

The average daily balance is calculated by multiplying each balance by the number of days it was held, summing these values, and then dividing by the total number of days.

$\text{Average Daily Balance} = \frac{(940 \times 12) + (1170 \times 3) + (1020 \times 16)}{31}$

Calculating each part:

• $940 \times 12 = 11280$
• $1170 \times 3 = 3510$
• $1020 \times 16 = 16320$

So,

$\text{Average Daily Balance} = \frac{11280 + 3510 + 16320}{31} = \frac{31110}{31} = 1003.55$

Step 2: Calculate the Finance Charge

Using the 1.7% monthly interest rate:

$\text{Finance Charge} = 1003.55 \times 0.017 = 17.06$

Answer

The finance charge on the June 5 bill is $17.06.

Would you like a deeper explanation on any part of this? Here are some additional questions to extend your understanding:

1. How would the finance charge change if a different interest rate were applied?
2. What effect would an additional purchase between May 20 and June 5 have on the finance charge?
3. How would the finance charge differ if payments or purchases were made on different dates?
4. Why is the average daily balance method commonly used by credit card companies?
5. How would a change in the balance calculation period affect the finance charge?

Tip: Understanding how average daily balance calculations affect finance charges can help in managing credit more effectively.