[2 pts] Find the present value of an investment that is worth $19,513.75 after earning 3%...

[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!

Expert Solution


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

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