Question

A credit card calculates interest using the average daily balance method. The card charges 23.4% 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 $6,149.68. Find the interest to be paid on April 1, the next billing date. Round to the nearest cent.

Answer 1

is it 1439.03?

6149.68 x .234

i don't think that's right

Answer 2

Here is the compound interest formula: \[\Large A = P(1 + \frac{ r }{ n })^{nt}\]
A = Account Balance
P = Principal Amount
r = Annual interest rate in decimal
n = compounding period (compounded how many times a year)
t = years invested ( here t will be in days because of average daily balance)

Answer 3

^^^ I think t should still be in years. The n should take care of daily compounding.
P = 6,149.68
r = 0.234
n = 365 (due to daily compounding)
t = 31 days (March 1 – March 31). t = 31/365 years
Find A.
Subtract P to get the interest.

Answer 4

140.32?

Answer 5

I am getting $123.40 using Google calculator.

Answer 6

so the A is the account balance for the month?

Answer 7

When interest is added to the credit card balance at the end of the month, the new balance is A.

Answer 8

which would make it 6290

Answer 9

oh ok

Answer 10

thank you

Answer 11

do you have the answer for the problem?