November 19, 2015
7.3 Finance Charge: Average Daily Balance Method.
1.)Average Daily-Balance Method: ______________________________________________________________________________________________________
2.) The first step is to find the _________________________.
3.)The second is step is to calculate the ___________________________________________________.
4.) The third step is to calculate the ___________________________________________________.
5) EXAMPLE 1: Sierra Warren has a charge account with a company that computes the finance charge using the average daily-balance-new purchases included. She checks to be sure the average daily balance is correct. See figure 7.3 for part of her statement. STEP 1: Find the sum of daily balances.
STEP 2: Find the number of days
STEP 3: Find the average daily balance
November 19, 2015
7) EXAMPLE 2: Sierra Warren (from example 1) checks the finance charge and the new balance. The finance charge is computed at 2% of the average daily balance. What is her new balance. STEP 1: Find the finance charge.
STEP 2: Find the unpaid balance.
STEP 3: Find the new purchases.
STEP 4: Find the new balance.
#8
Write the highlighted
totals next to the
statement on
your paper
Find the total # of days
Find the total sum of balances
Use these to find a)
November 19, 2015
9) EXAMPLE 3: Vana Dodd’s credit card finance charge is based on the average-daily-balance method-new purchases included. Her monthly periodic rate is 2.3% and her finance charge was $29.00 for the last billing cycle. Find her average daily balance.
HINT: Let a = Vana’s average daily balance,
Finance charge = Average Daily Balance X periodic rate. _____________ = __________________ X _____________