Question

Calculate the average daily balance based on the following information:

29-day billing cycle
4/17 Billing date and previous balance $1,100
4/27 Payment $700
4/29 Charge $300
5/7 Payment $50

Answer 1

You need to use the formula:
Average daily balance = Sum of (day#*balance) / number of days
1. Day 1 is 4/17 with balance of $1100 until 4/26, this gives us 10 days and the sum of:
$1100*10 = $11000
2. Day 11 is 4/27, the balance changes:
$1100 - $700 = $400
Until next balance change we have 2 days and the sum is:
$400*2 = $800
3. Day 13 is 4/29, the balance changes:
$400 + $300 = $700
Until next balance change on 5/7 we have 8 days and the sum is:
$700*8 = $5600
4. Day 21 is 5/7, the balance change:
$700 - $50 = $650
This stays for the rest of period, thus 9 days, and the sum is:
$650*9 = $5850
Add up all the sums above and divide by 29 to get your answer.