Question

3. (12 points) For the credit card account, assume one month between billing dates and interest of

1.35% per month on the average daily balance.
Previous Balance: $534.98
April 1
April 3
April 6
April 8
April 11
April 17
April 29
Date
Billing Date
Payment
Gas
Dinner
Clothes
Gas
Car Maintenance
Find the average daily balance by filling in the table below. Once you have the average daily balance,
find the monthly finance charge and the account balance for the next monthly billing period.
Totals:
$400.00
$51.69
$84.37
$212.42
$49.16
$198,28
Running Balance Number of Days Until
Balance Changed
Average daily balance:
Finance charge:
Balance for the next billing period:
(Running Balance) x
(Number of Days)

Answer 1

Let's calculate the average daily balance first.

The running balance changes on the following dates: April 1, April 3, April 6, April 8, April 11, April 17, and April 29.

Here's how the running balance changes:

- April 1 (Billing Date): $534.98 - $400.00 (Payment) = $134.98

- April 3: $134.98 + $51.69 (Gas) = $186.67

- April 6: $186.67 + $84.37 (Dinner) = $271.04

- April 8: $271.04 + $212.42 (Clothes) = $483.46

- April 11: $483.46 + $49.16 (Gas) = $532.62

- April 17: $532.62 + $198.28 (Car Maintenance) = $730.90

- April 29: No change in balance.

Now, let's calculate the average daily balance:

- April 1-3: $134.98 * 2 days = $269.96

- April 3-6: $186.67 * 3 days = $560.01

- April 6-8: $271.04 * 2 days = $542.08

- April 8-11: $483.46 * 3 days = $1450.38

- April 11-17: $532.62 * 6 days = $3195.72

- April 17-29: $730.90 * 12 days = $8770.80

Add these all up and divide by 30 (the number of days in April) to get the average daily balance:

($269.96 + $560.01 + $542.08 + $1450.38 + $3195.72 + $8770.80) / 30 = $377.89

Now, let's calculate the finance charge. The interest rate is 1.35% per month, so:

Finance charge = Average daily balance * Interest rate = $377.89 * 0.0135 = $5.10

Finally, the balance for the next billing period is the running balance at the end of the month plus the finance charge:

Balance for the next billing period = $730.90 + $5.10 = $736.00

So, the average daily balance is $377.89, the finance charge is $5.10, and the balance for the next billing period is $736.00.