Question

The finance charge on Lauren’s credit card bill last month was

$13.50. Her APR is 18%. What was her average daily balance?

Answer 1

$900

Explanation:

You want to know Lauren's average daily balance if she was charged a $13.50 finance charge on a card with an APR of 18%.

Finance charge

The finance charge is the product of the monthly interest rate and the average daily balance. The monthly rate is 1/12 of the annual rate. This tells us ...

finance charge = ADB × 18%/12

$13.50 = ADB × 0.015

ADB = $13.50/0.015 = $900

Lauren's average daily balance was $900.

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