Question

The activity on Denise Hellings' Sears account for one billing period is shown below. Find the average daily balance and the finance charge if the billing period is March 1 through March 31, the previous balance was $157.26, and the annual simple interest rate is 21%. (Round your answers to the nearest cent.)

March 5 payment $45.00
March 17 tools $33.51
average daily balance ______
finance charge _________

Answer 1

To find the average daily balance and finance charge, calculate the daily balances for each day of the billing period and use the formula for average daily balance and finance charge.

Step-by-step explanation:

To find the average daily balance, we need to calculate the daily balances for each day of the billing period, including the previous balance, payments, and charges.

1. The average daily balance is the sum of the daily balances divided by the number of days in the billing period.
2. The finance charge is calculated using the average daily balance and the annual interest rate.

Let's calculate:

1. March 1 to March 5: Daily Balance = Previous Balance ($157.26)
2. March 6 to March 17: Daily Balance = Previous Balance ($157.26) - Payment ($45.00)
3. March 18 to March 31: Daily Balance = Previous Balance ($157.26) - Payment ($45.00) - Tools ($33.51)

Now we can calculate the average daily balance:

Average Daily Balance = (Total Daily Balances) / (Number of Days)

Finance Charge = Average Daily Balance * (Annual Interest Rate / 365) * (Number of Days)

Plug in the values and calculate to find the average daily balance and the finance charge.