Question

A credit card calculates interest using the average daily balance method. The card charges 19.1% annual interest rate on the average daily balance. The following transactions occurred during the March 1 – March 31 billing period. The average daily balance for the billing period is $6,205.16. Find the interest to be paid on April 1, the next billing date. Round to the nearest cent.

Answer 1

19.1% annual interest rate on the average daily balance.
means you will need to first convert APR into effective daily interste rate, do you have that equation?

Answer 2

Is that the equation A=P(1+rt)

Answer 3

i think its this equation:
r = [1 + (i/n)]^n -1

Answer 4

what class is this? i may be making this more complicated than you teacher expects..

Answer 5

hvae you learned about periodic effective interest rates?

Answer 6

this is for a MAT 142 class at ASU but it is the "Finance" section. It's supposed to be basic algebra

Answer 7

since this is a 100 level class, i'll assume its the easier way to do this problem..

"The card charges 19.1% annual interest rate on the average daily balance.
so this means we need to convert annual interest rate down to a daily interest rate. But! the fact that the problem gives you this, "The average daily balance for the billing period is $6,205.16" means to me, we don't have to use a 'daily interest rate' but a 'monthly interste rate.
so,
r means monthly rate.
so,
r= 19.1%/12 = 1.5916667%

$6205.16 * 1.591667% = $98.76546333 is what is needed to be paid in interest for this month.
98.76546333, rounded to the nearest cent becomes
$98.77