Question

1. [2 pts] Find the present value of an investment that is worth $19,513.75 after

   earning 3% simple interest for 5 " years.

2. The table below shows the activity on the credit card statement of Miss Pepper Mills for the month of April. She started the month with a balance of $342.57.

Date	Activity	Location	Amount
04/05	Payment	Payment	$200.00
04/15	Charge	Gas	$26.37
04/22	Charge	Macy’s	$105.42
04/25	Charge	Starbuck’s	$4.24

A. [4 pts]Find the average daily balance.

B. [4 pts]If her card charges an 18.5% annual interest rate on her average daily

balance, calculate Miss Pepper Mill’s finance charge for the month of April.

Please show work and answer in sentences! Thank you!

Answer 1

Answer 1
Present value of investment = Future value / (1+Interest rate)^number of years
Present value of investment = $19513.75 / (1+0.03)^5
Present value of investment = $16,832.52
Answer 2A
Calculation of Average daily balance
Period (A)		No.of days (B)	Balance outstanding ( C )	B * C
01-Apr	03-Apr	3	$342.57	$1,027.71
04-Apr	14-Apr	11	$142.57	$1,568.27
15-Apr	21-Apr	7	$168.94	$1,182.58
22-Apr	24-Apr	3	$274.36	$823.08
25-Apr	30-Apr	6	$278.60	$1,671.60
Total				$6,273.24
/ No.of days in a billing cycle				30
Average daily balance				$209.11
Answer 2B
Calculation of Miss Pepper Mill’s finance charge for the month of April.
Finance charge = [Average daily balance x Interest rate p.a.x Number of days in a billing cycle] / Number of days in a year
Finance charge = [$209.11 x 18.5% x 30 days]/365 days = $3.18