Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 68

Find the finance charge for the following revolving charge accounts. Assume that interest is calculated on the average daily balance of the account. (See Example.)
Finding the Average Daily Balance
Beth Hogan's balance on a Visa card was $209.46 on March 3. Her activity for the next 30 days is shown in the table. (a) Find the average daily balance on April 3. Given finance charges based on 1 1 2 % on the average daily balance, find (b) the finance charge for the month and (c) the balance owed on April 3.
SOLUTION
(a)

Quick TIP
The billing period in Example is 31 days. Some billing periods are 30 days (or 28 or 29 days in February). Be sure to use the correct number of days for the month of the billing period.
There are 31 days in the billing period (March has 31 days). Find the average daily balance as follows:
Step 1 Multiply each unpaid balance by the number of days for that balance.
Step 2 Total these amounts.
Step 3 Divide by the number of days in that particular billing cycle (month).

Hogan will pay a finance charge based on the average daily balance of $207.50.
(b) The finance charge is.015 × $207.50 = $3.11 (rounded).(c) The amount owed on April 3 is the beginning unpaid balance less any returns or payments, plus new charges and the finance charge.