Question

3. The activity on Rusty Gates' MasterCard account for one billing period is shown below

March 23 sporting goods $124.00

April 2 payment $1200.00

April 10 bookstore $246.00

a) Find the average daily balance if the billing period is March 16 through April 15 and the previous balance as $4321.00 [March has 31 days.] Make a chart

b) Find the finance charge if the annual interest rate is 21.5%

Answer 1

a). Calculating the Average Daily Balance:-

Date	Purchase/(payment)	Balance each day	No of days till next transaction	Outstanding Balance
16 Mar to 22 Mar	4321	4321	7	30247
23 Mar to 1 Apr	124	4445	10	44450
2 Apr to 9 April	-1200	3245	8	25960
10 April to 15 April	246	3491	6	20946
Total			31	121603

Note- Outstanding Balance = No of days till next transaction*Balance each day

- Balance each day = Previous Balance each day +/- Purchase or (payment)

Average Daily Balance = Outstanding balance/Total no of days

= 121,603/31days

= $ 3922.68 per day

b). Finance Charge = Average daily Monthly Balance*Annual Interest rate*Total no of day/365

= $3922.68*0.215*31/365

= $71.63

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