Please help me help my son with his math problems......?

Question

Use the daily balance method.

A customer's charge account shows a balance of $390 on January 1. A payment of $100 was made on January 16. Purchases of $190 were made on January 23. An annual rate of 19.5% is applied to the account.

A) What is the average daily balance?
a. $393.55
b. $423.35
c. $386.45
d. $742.25

B) What is the finance charges on this account?
a. $7.31
b. $8.61
c. $6.39
d. $4.31

Thank you so much for your help. My husband, who is currently serving in Iraq, is the household mathwiz. Please explain, if you can, how you got your answer so that I may explain it to my son.

TIA

Answer 1

I think there are a few things missing in the problem since this is the equation for the ADV.

A / D) x (I / P)
Where:
A = the sum of the daily balances in the billing period
D = number of days in the billing period
I = annual interest rate
P = number of billing periods per year (usually 12)

This is unfortunately the only help I can give help on. I don't remember seeing this. Just compound interest. Hope his dad gets back soon.

Answer 2

jan 1 to jan 15 balance 390 for 15 days
jan 16 - jan 22 balance 290 for 7 days (-100 payment )
jan 23 - jan 31 balance 480 for 9 days (190 purchase )
total 31 days
Note: I applied the payments and charges at the day they occured , this may not be what a real bank would do.

so ((15 * 390) + (7 * 290 )+( 9 * 480))/31 31 days in month
(5850+ 2030+ 4320) /31
12200/31= 393.55 ( rounded)

so A is correct for average daily balance

finance charge shouls be 6.40 but I would accept $6.39
its ($393.55 *19.5%)/12 apply the percentage rate and divide by 12 to get charge per month.
thats (393.55 * 0.195 ) /12

(its a rounding issue , which way to go, up or down )

Answer 3

Jan. 1 - $390 - $390 Balance for 15 days = 5850
Jan. 16 +$100 - $290 Balance for 7 days = 2030
Jan. 23 -$190 - $480 Balance for 9 days = 4320
Average daily balance = 12200/31 or $393.55
Monthly Interest Rate 19.5/12 = 1.625% * $393.55 = $6.39
Jan. 31 -$6.39 - $486.39

Answer 4

Ok, so figure the average…
$390 at 15 days
$290 at 7 days
$480 at 9 days

5850
2030
4320
= 12200
12200/31 =A. $393.55

PART TWO

take ($393.55 * 19.5%) / 12
which equals C. $6.39

Answer 5

huh, I could probably answer the problem but I don't understand what they're asking. What do they mean by 'average daily balance' or 'finace charges'.

I'm really sorry I can't help.