Raj’s credit card has a 16% interest rate, a 31-day bill cycle and charges finance charges...

Raj’s credit card has a 16% interest rate, a 31-day bill cycle and charges finance charges using the average daily balance method including new purchases.

Imagine the following things happened during the most recent billing cycle:

a. Raj’s card has an initial balance of $316.

b. On Day 3, Raj buys Pizza for $22

c. On Day 12 Raj buys a new TV for $1,200.

d. On Day 25 Raj makes a payment to the credit card company for $900

When Raj gets his bill for this billing cycle, how much in total will he owe?

Expert Solution

Date	Opening balance	Debits	Credits	Closing balance
1-Jan	316.00	-	-	316.00
2-Jan	316.00	-	-	316.00
3-Jan	316.00	22.00	-	338.00
4-Jan	338.00	-	-	338.00
5-Jan	338.00	-	-	338.00
6-Jan	338.00	-	-	338.00
7-Jan	338.00	-	-	338.00
8-Jan	338.00	-	-	338.00
9-Jan	338.00	-	-	338.00
10-Jan	338.00	-	-	338.00
11-Jan	338.00	-	-	338.00
12-Jan	338.00	1,200.00	-	1,538.00
13-Jan	1,538.00	-	-	1,538.00
14-Jan	1,538.00	-	-	1,538.00
15-Jan	1,538.00	-	-	1,538.00
16-Jan	1,538.00	-	-	1,538.00
17-Jan	1,538.00	-	-	1,538.00
18-Jan	1,538.00	-	-	1,538.00
19-Jan	1,538.00	-	-	1,538.00
20-Jan	1,538.00	-	-	1,538.00
21-Jan	1,538.00	-	-	1,538.00
22-Jan	1,538.00	-	-	1,538.00
23-Jan	1,538.00	-	-	1,538.00
24-Jan	1,538.00	-	-	1,538.00
25-Jan	1,538.00	-	900.00	638.00
26-Jan	638.00	-	-	638.00
27-Jan	638.00	-	-	638.00
28-Jan	638.00	-	-	638.00
29-Jan	638.00	-	-	638.00
30-Jan	638.00	-	-	638.00
31-Jan	638.00	-	-	638.00
Total		1,222.00	900.00	28,134.00	[A]

Number of days				31	[B]
Average balance				907.55	[A/B]

Interest rate				16.00%
Interest to be paid				11.93	[ 907.55 × 0.16 × 31/365 ]

End of period balance			649.93	[ 638 + 11.93]

Balance is 649.93

jeff jeffy answered 1 year ago

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