How is a finance charge calculated

A. Multiply the unpaid balance by the monthly interest rate

B. Multiply the minimum payment by the monthly interest rate

C. Multiply the unpaid balance to the annual interest rate

D. Multiply the paid balance by the monthly interest rate

option A. Multiply the unpaid balance by the monthly interest rate

Step-by-step explanation:

Finance charges are the monthly service fee charged by lender on the credit used by borrower if they wish to skip the payment of monthly bill and carry forward it to next month.

So, we can calculate finance charges as monthly interest accrued on the unpaid balance.

Finance charges = Unpaid balance x Monthly interest rate.

Hence, option A is correct, i. e. Multiply the unpaid balance by the monthly interest rate.