A charge account had a balance of $920 on May 5. A purchase of $213 was made on May 17, and a payment of $125 was made on May 20. The interest on the average daily balance is 1.7% per month. Find the finance charge on the June 5 bill. (Round your answer to the nearest cent.)

To calculate the finance charge on the June 5 bill, we need to use the **Average Daily Balance Method**. Here's the process step-by-step:

### Step 1: Determine the daily balance for each period
We start with the balance on May 5 and adjust it based on the purchase and payment made.

1. **May 5 - May 16 (12 days)**: The balance was $920 (no transactions were made during this period).
2. **May 17 - May 19 (3 days)**: A purchase of $213 was made on May 17, so the new balance is:
   \[
   920 + 213 = 1133
   \]
3. **May 20 - June 5 (17 days)**: A payment of $125 was made on May 20, so the balance becomes:
   \[
   1133 - 125 = 1008
   \]

### Step 2: Calculate the average daily balance
Now, let's calculate the average daily balance. This is done by multiplying the balance during each period by the number of days and then finding the average over the 32 days (from May 5 to June 5).

\[
\text{ADB} = \frac{(920 \times 12) + (1133 \times 3) + (1008 \times 17)}{32}
\]

### Step 3: Compute the finance charge
The finance charge is 1.7% of the average daily balance. Once we find the ADB, we calculate the finance charge using this formula:

\[
\text{Finance Charge} = \text{ADB} \times 0.017
\]

Let me compute that.The finance charge on the June 5 bill is **$16.77**.

Would you like more details or have any questions about this process? Here are some related questions to deepen your understanding:

1. How is the average daily balance method different from other interest calculation methods?
2. What would happen to the finance charge if the interest rate increased to 2%?
3. Can the average daily balance change if the payment or purchase dates are different?
4. What effect does making an earlier payment have on reducing the finance charge?
5. How would the finance charge be calculated if no payment was made in May?

**Tip:** Always keep track of the exact dates of purchases and payments when calculating finance charges, as they can significantly affect the final amount.

A charge account had a balance of $920 on May 5. A purchase of $213 was made on May 17, and a payment of $125 was made on May 20. The interest on the average daily balance is 1.7% per month. Find the finance charge on the June 5 bill. (Round your answer to the nearest cent.)

Learn how to calculate the finance charge for a charge account using the Average Daily Balance Method. This problem involves an account balance of $920, a purchase of $213, and a payment of $125, with an interest rate of 1.7% per month. Suitable for students in Grades 9-11.

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