Question

Chapter 6 Financial Planning Exercise 11 Calculate credit card finance charge Parker Young recently received his monthly MasterCard bill for the period June 1-30, 2017, and wants to verify the monthly finance charge calculation, which is assessed at a rate of 17 percent per year and based on ADBs, including new purchases. His outstanding balance, purchases, and payments are as follows: Previous balance: $346 Purchases: Payments: June 4 $278 June 21 $20 June 12 June 20 June 26 a. What is his ADB for the period? (Use a table like the one in Exhibit 6.8 for your calculations.) Round the answer to 2 decimal places. $ b. What is his finance charge for the period? (Use a table like the one in Exhibit 6.8 for your calculations.) Round the answer to 2 decimal places.

Answer 1

IF ANY QUERY, FEEL FREE TO ASK Solution a. Average daily balance 689 Period June 1 to 3 June 4 to 11 June 12 to 19 June 20 June 21 to 25 June 26 to 30 Total No. of Days (1) | Balance (2)| Calculation (1) x (2) 3 346 1038 624 4992 5512 770 770 5 750 3750 5 817 4085 30 Total 20147 Average daily balance = = 671.57 20147 30 Hence, average daily balance is $ 671.57 b. Finance Charges Finance Charges = 671.57 x 17% x 1/12 = 9.51 Hence, Finance charges are $ 9.51