Financial Algebra Chapter 4 day 20
Monthly Finance Charge and Average Daily Balance
Name:
Chapter 4.4 Pg 193-199
Per:
Do Now: Find the monthly payment on a car in which you are financing $12,000 with your bank with an APR of
4.2% for 4 years.
Monthly Interest: d 
r%
; change to a decimal when d is in a formula. (Note: Never pay a finance charge if
12
you pay your bill in full every month!)
a) Find the monthly interest rate, as a percent, for the following APR:
1) 14.4% =
2) 27.3% =
b) Find the monthly interest rate, as a decimal, for the following APR:
1) 15.3% =
3) 24.9% =
2) 22.8% =
To find new balance due on a monthly bill with finance charge calculated in use the following formula:
A = P(1 + d) , where d is a decimal and P is the average daily balance (ADB).
a) Find the new balance with the monthly finance charge added given the following information:
ADB = $947.82
APR = 24.3%
Average Daily Balance: Is the average of the amounts you owed each day of the billing period. It changes due to
purchases made and payments made.
To find the average daily balance, multiply the number of days by corresponding amount owed, add all
the products, and then divide by the total number of days. (See Smartboard example.)
Guided example: David did not pay last month’s credit card bill in full. Find his average daily balance using the
daily balances for his last billing cycle. Round this answer to the nearest penny!
For eight days he owed $372.28
For six days he owed $589.13
For eleven days he owed $294.47
For five days he owed $416.72
b) If the APR 19.8%, find the new balance with the monthly finance charge added for this bill.
More examples:
1) Find the monthly finance charge given the following information (round to the nearest penny):
a)
ADB = $1,524.97
b)
ADB = $628.91
APR = 18.6%
APR = 28.5%
2) Daniella did not pay last month’s credit card bill in full. Find her average daily balance using the daily balances
for her last billing cycle. Round this answer to the nearest penny!
For nine days she owed $716.49
For thirteen days she owed $589.13
For seven days she owed $834.56
b) If the APR 21%, find the new balance with the monthly finance charge added for this bill.
3) Dwayne did not pay last month’s credit card bill in full. Find his average daily balance using the daily balances
for his last billing cycle. Round this answer to the nearest penny!
For five days he owed $902.34
For nine days he owed $1,571.65
For eleven days he owed $781.47
For six days he owed $964.18
b) If the APR 26.7%, find the new balance with the monthly finance charge added for this bill.
4) Djohna did not pay last month’s credit card bill in full. Find her average daily balance using the daily balances
for her last billing cycle. Round this answer to the nearest penny!
For thirteen days she owed $1,954.14
For seven days she owed $1,273.82
For ten days she owed $1,691.65
b) If the APR 22.2%, find the new balance with the monthly finance charge added for this bill.