Question

Judy isn't sure whether a credit card using the average daily balance method, a credit card using the previous balance method, or a credit card using the adjusted balance method is right for her. Regardless of the method used, Judy's APR will be 26%. Her last 30-day billing cycle was erland typical for her, so she decided to calculate the amount of interest charged by each method to compare them. The opening balance of her last 30-day billing cycle was $930, and it remained that amount for the first 10 days of the billing cycle. She then made a purchase for $550, so her balance jumped to $1480, and it remained that amount for the next 10 days. Judy then made a payment of $790, so her balance for the last 10 days of the billing cycle was $690. Help Judy decide which method is best for her based on her last 30-day billing cyclePart I: What is Judy's average balance for her billing cycle? Part II: If Judy's credit card had used the average daily balance method, how much would she have been charged in interest for her last 30-day billing cycle? Part III: If Judy's credit card had used the previous balance method, how much would she have I been charged in interest for her last 30-day billing cycle? Part IV: If Judy's credit card had used the adjusted balance method, how much would she have been charged in interest for her last 30-day billing cycle?

Answer 1

Method of using best a credit card

Part I: What is Judy's average balance for her billing cycle?

AvBalance = (930 + 1480 + 690)/3 = $1033.3 dollars

Part 2

how much would she have been charged in interest for her last 30-day billing cycle?

APR is 26% anual

Then monthly rate is 26/12 = 2.16%

Now find 2.16% of 1033.3 dollars

its equal to 1033.3x (2.16/100) = $22.38 dollars