Question

Sally's balance on her credit card is $75.00 on the first day of august. she makes a payment of $18.00 on august 17 and

a new purchase of $41.00 on august 29. the annual interest rate is 21.25%. what is sally's average daily balance and
finance charge for the month of august?

Answer 1

To find Sally's average daily balance for August, we add up the daily balances for each day of the month and divide by the number of days. The average daily balance is $68.39, and the finance charge for the month is $0.0393.

Step-by-step explanation:

To calculate Sally's average daily balance for the month of August, we need to add up the daily balances for each day of the month and divide by the number of days. Let's break it down:

1. On August 1, Sally's balance is $75.00.
2. From August 2 to August 16, her balance remains $75.00.
3. On August 17, Sally makes a payment of $18.00, so her balance becomes $75.00 - $18.00 = $57.00.
4. From August 18 to August 28, her balance remains $57.00.
5. On August 29, Sally makes a purchase of $41.00, so her balance becomes $57.00 + $41.00 = $98.00.
6. From August 30 to August 31, her balance remains $98.00.

To calculate the average daily balance, we calculate the total sum of the daily balances ($75.00 * 16 + $57.00 * 11 + $98.00 * 2) and divide by the number of days in August (31). So, the average daily balance is ($75.00 * 16 + $57.00 * 11 + $98.00 * 2) / 31 = $68.39 (rounded to two decimal places).

To calculate the finance charge, we multiply the average daily balance by the annual interest rate and divide by 365 (assuming a non-leap year). So, the finance charge is $68.39 * 0.2125 / 365 = $0.0393 (rounded to four decimal places).