Use the average daily balance method to compute the finance

Use the average daily balance method to compute the finance charge on the credit card account for the previous month. The starting balance and transactions on the account for the month of April are given to the right. Assume an annual interest rate of? 18%.

?Month: April? (30 days); previous? month\'s balance: ?$380

April 5

Charged ?$51 for a coat

April 8

Made payment of ?$90

April 14

Charged ?$149 for DVDs

April 29

Charged ?$29 for groceries

The finance charge is

?(Round to the nearest cent as? needed.)

Solution

Date Purchases Payment Balance 01-Apr $                                                                380.00 05-Apr $                                                                  51.00 $                                                                431.00 08-Apr $                                                                  90.00 $                                                                341.00 14-Apr $                                                               149.00 $                                                                490.00 29-Apr $                                                                  29.00 $                                                                519.00 Date Balance Number of Days* Balance 1 to 4 Days $                                                               380.00 4*380= $                                                            1,520.00 5 to 7 days $                                                               431.00 3*431= $                                                            1,293.00 8 to 13 Days $                                                               341.00 6*341= $                                                            2,046.00 14 to 28 days $                                                               490.00 15*490= $                                                            7,350.00 29 to 30 Days $                                                               519.00 2*519 $                                                            1,038.00 $                                                          13,247.00 Average Daily Balance=($13247/30) $                                                               441.57 I=441.57*18%*(30/365) Finance Charge= $                                                                    6.53