Question

Calculate the monthly finance charge assuming a 20% annual interest rate and the following average daily balances.

	Days	Balance
	9	$1,650
	11	$9,000
	3	$1,700
	8	$3,800
Total	31

Answer 1

Formula for: Finance Changes = (Days x Balance x Rate) / Number of days in a year

Calculation of finance changes:

Days (D)	Balance (B)	Rate (R)	No. of days in Year (Y)	Finance Charges (FC)
D	B	R	Y	FC = (D x B x R )/ Y
9	$1,650	20%	365	$8.14
11	$9,000	20%	365	$54.25
3	$1,700	20%	365	$2.79
8	$3,800	20%	365	$16.66
			Total finance Changes =	$81.84

Total finance Changes = $81.84 (Rounding to two decimal places)

(We are assuming there are 365 days in a year)