Question

(A-2) A credit card account had a $233 balance on March 5. A purchase of $125 was made on March 12, and a payment of $125 was made on March 28. Find the average daily balance if the billing date is April 5.?

(B-3) A charge account had a balance of $995 on May 5. A purchase of $227 was made on May 17, and a payment of $125 was made on May 20. The interest on the average daily balance is 1.6% per month. Find the finance charge on the June 5 bill.?

Answer 1

A-2) Calculating the Average Daily Balance:-

Date	Purchase/(payment)	Balance each day	No of days till next transaction	Outstanding Balance
5 March to 11 March	233	233	7	1631
12 March to 27 March	125	358	16	5728
28 March to 4 April	-125	233	8	1864
Total			31	9223

Note- Outstanding Balance = No of days till next transaction*Balance each day

- Balance each day = Previous Balance each day +/- Purchase or (payment)

Average Daily Balance = Outstanding balance/Total no of days

= $ 9223/31

= $ 297.52 per day

A-3) Calculating the Average Daily Balance:-

Date	Purchase/(payment)	Balance each day	No of days till next transaction	Outstanding Balance
5 May to 16 May	995	995	12	11940
17 May to 19 May	227	1222	3	3666
20 May to 4 June	-125	1097	16	17552
Total			31	33158

Note- Outstanding Balance = No of days till next transaction*Balance each day

- Balance each day = Previous Balance each day +/- Purchase or (payment)

Average Daily Monthly Balance = Outstanding balance/Total no of days

= $ 33158/31 days

= $ 1069.61 days

Finance Charge = Average daily Monthly Balance*Monthly Interest rate

= $ 1069.61*1.6%

= $17.11

So, Finance Charge on June 5 bill is $ 17.11