A credit card account shows an average daily balance of $8,431.10 and the monthly interest rate (finance rate) is 1.4%. What is the finance charge for the month?

Introduction:
This problem is a straightforward application of simple percentage calculation for a monthly finance charge. Credit card companies often compute interest using the average daily balance multiplied by a monthly interest rate. We are given the average daily balance and the monthly interest rate and must find the finance charge for that month.

Given Data / Assumptions:

• Average daily balance, B = 8,431.10 dollars
• Monthly interest rate, r_monthly = 1.4% per month
• No special adjustments or fees beyond the finance charge are considered

Concept / Approach:
The finance charge F for a given month, using the average daily balance method, is: F = B * r_monthly where r_monthly must be in decimal form. This is a simple interest calculation applied to one month based on the average daily balance over that billing cycle.

Step-by-Step Solution:
Step 1: Convert the monthly interest rate from percent to decimal. r_monthly = 1.4% = 1.4 / 100 = 0.014 Step 2: Multiply the average daily balance by the decimal rate. F = 8431.10 * 0.014 Step 3: Perform the multiplication. F ≈ 118.0354 Step 4: Round to the nearest cent. F ≈ 118.04 dollars

Verification / Alternative check:
As a sense check, 1% of 8,431.10 dollars is: 0.01 * 8431.10 = 84.311 An additional 0.4% is: 0.004 * 8431.10 = 33.7244 Adding them: 84.311 + 33.7244 ≈ 118.0354 Rounded, this again gives 118.04 dollars, confirming the calculation.

Why Other Options Are Wrong:
98.04: This would correspond to a lower monthly rate than 1.4%, around 1.16%, and does not match the given percentage. 88.04 and 68.04: These figures are too small and would require much lower interest rates, not the stated 1.4%. 128.04: This is higher than the correct finance charge and would reflect a higher monthly rate. 118.04: This matches the computed finance charge at 1.4% of the average daily balance.

Common Pitfalls:
Some learners incorrectly apply an annual rate instead of the monthly rate or misinterpret 1.4% as 0.14 in decimal form. Another common error is rounding the monthly rate too early or performing the multiplication incorrectly. It is also important to remember that the average daily balance has already accounted for variations in daily usage, so we simply multiply by the monthly rate, not by the number of days again.

Final Answer:
The finance charge for the month on an average daily balance of 8,431.10 dollars at a monthly rate of 1.4% is 118.04 dollars.