Question

Theresa has a credit card that uses the average daily balance method. For the first 12 days of one of her billing cycles, her balance was $350, and for the last 19 days of the billing cycle, her balance was $520. If her credit card's APR is 14%, which of these expressions could be used to calculate the amount Theresa was charged in interest for the billing cycle?

Answer 1

Answer:

(0.14/365 * 31) ((12*$350 + 19*$520) / 31 ) APEX

Answer 2

Using the average daily balance method, the amount to be used in calculating Theresa's interest is given by:

$\frac{350\times12+520\times19}{12+19} = \frac{4200+9880}{31} \\ \\ = \frac{14080}{31} = 454.19$

Therefore, the interest charge on Theresa for the biling cycle is given by:

$\frac{454.19(0.14)}{12} = \frac{63.59}{12} \\ \\ =\ 5.30$