Question

Use average daily balance method to answer the questions based on the information given.

The account balance on April 1st is $50.51. On April 15th a payment of $15.00 is made. On April 25th a purchase of $19.27 is made. What is the average daily balance for the account? What is the finance charge if the annual rate is 18%? What is the new account balance?
Average daily balance is______
Finance charge is_____
New balance is_______

Answer 1

Average daily balance = $42.51

The Finance charge = $0.64

New account balance = $36.15

Explanation:

I got it right on the test

Answer 2

Average daily balance is $ 1.809,

Finance charge is $ 0.76

New balance is $ 55.54

Explanation:

Given,

The original account balance = $ 50.51,

After paying $15.00,

New balance = 50.51 - 15 = 35.51,

Again after spending $19.27,

Final balance = 35.51 + 19.27 = 54.78,

∵ Number of days = 25,

So, the average daily balance =
`\frac{\text{Total balance}}{\text{Number of days}}`

`=(54.27)/(30)`

= $ 1.809

Finance charge annual rate = 18% = 0.18

⇒ Finance charge monthly rate =
`(0.18)/(12)`

Thus, the amount of finance charge =
`(0.18)/(12)* 50.51`

= $0.75765

≈ $ 0.76

New balance = total balance + finance charge = 54.78 + 0.76 = $ 55.54