document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1192450>Question 1192450</A>: <I><SPAN STYLE=\"word-break: break-all;\"> This is a problem I have, I have tried everything to solve it and can't. I have one answer spot left. Thank you\r<BR>\n" );
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document.write( "Calculate the monthly finance charge for the credit card transaction. Assume that it takes 10 days for a payment to be received and recorded, and that the month is 30 days long. (Round your answer to the nearest cent.)\r<BR>\n" );
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document.write( "$625 balance, 18%, $575 payment; average daily balance method </SPAN>\n" );
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document.write( "It really depends on when the payment was made. Unfortunately your teacher didn't provide this info.\r<BR>\n" );
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document.write( "The longer the person delays payment, the higher the finance charge will be.<BR>\n" );
document.write( "This is because the average daily balance (ADB) will be larger since the individual daily balances themselves are larger for longer, until the payment is made of course.<BR>\n" );
document.write( "It's a very good idea to always pay off the balance as soon as possible.\r<BR>\n" );
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document.write( "I'm going to assume that the person made the payment on day 1 and it took 10 days for the payment to be fully processed. <BR>\n" );
document.write( "This will ensure that the ADB is as small as possible to lead to the smallest possible finance charge.\r<BR>\n" );
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document.write( "If that assumption is correct, then we can make a chart like this<TABLE  border = \"1\" cellpadding = \"5\">\n" );
document.write( "<tr><TD >Balance</TD><TD >Number of days</TD><TD >Start and End Date</TD></tr><tr><TD >$625</TD><TD >10</TD><TD >Day 1 to Day 10</TD></tr><tr><TD >$50</TD><TD >20</TD><TD >Day 11 to Day 30</TD></tr>\n" );
document.write( "</TABLE>The $50 is from subtracting the payment of $575 from the original balance $625<BR>\n" );
document.write( "625 - 575 = 50\r<BR>\n" );
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document.write( "Multiply each balance with their respective day count<BR>\n" );
document.write( "625*10 = 6250<BR>\n" );
document.write( "50*20 = 1000\r<BR>\n" );
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document.write( "Then add the products<BR>\n" );
document.write( "6250+1000 = 7250\r<BR>\n" );
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document.write( "This is then divided over the 30 days to find the average daily balance (ADB)<BR>\n" );
document.write( "ADB = 7250/30 = 241.67 dollars approximately<BR>\n" );
document.write( "For more information, check out the concept of a weighted mean.\r<BR>\n" );
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document.write( "We use this to calculate the finance charge F<BR>\n" );
document.write( "F = (ADB*APR*n)/365<BR>\n" );
document.write( "F = (241.67*0.18*30)/365<BR>\n" );
document.write( "F = 3.57539178082191<BR>\n" );
document.write( "F = <font color=red>3.58</font>\r<BR>\n" );
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document.write( "The n = 30 refers to the number of days in the billing cycle. <BR>\n" );
document.write( "I'm using the decimal form of the APR 18% to get 0.18<BR>\n" );
document.write( "I'll assume that the credit card company uses a 365 day year (rather than a 360 day year).\r<BR>\n" );
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document.write( "Another way to think of it is to recall the simple interest formula<BR>\n" );
document.write( "i = P*r*t<BR>\n" );
document.write( "The interest (i) is the finance charge<BR>\n" );
document.write( "P = 241.67 is the ADB<BR>\n" );
document.write( "r = 0.18 is the decimal form of the APR of 18%<BR>\n" );
document.write( "t = 30/365 is the time in years that the simple interest is being computed for.<BR>\n" );
document.write( "You should find that:<BR>\n" );
document.write( "i = P*r*t<BR>\n" );
document.write( "i = 241.67*0.18*(30/365)<BR>\n" );
document.write( "i = 3.57539178082191<BR>\n" );
document.write( "i = <font color=red>3.58</font>\r<BR>\n" );
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document.write( "Or you can think of it like this<BR>\n" );
document.write( "finance charge = (ADB)*(daily periodic rate)*(number of days in billing cycle)<BR>\n" );
document.write( "finance charge = (241.67)*(0.18/365)*(30)<BR>\n" );
document.write( "finance charge = 3.57539178082191<BR>\n" );
document.write( "finance charge = <font color=red>$3.58</font><BR>\n" );
document.write( "Effectively it's nearly the same formula as before, but a few things have been rearranged somewhat.\r<BR>\n" );
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document.write( "Answer: <font color=red>$3.58</font><BR>\n" );
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