10) Tam\'s credit card cycle ends on the 25th of every month. The interest rate

Question

10) Tam's credit card cycle ends on the 25th of every month. The interest rate on Tam's card is 22% and the billing cycle runs from the 26th of the month to the 25th of the following month. At the end of the July 26th - August 25th billing cycle, Tam's balance was $2,000. During the next billing cycle, Tam made one purchase, of $500.00 on 9/12 and one payment of $250.00 on 9/22. Show all work.

a) Find the average daily balance on the credit card during the August 26th to September 25th.

b) Find the interest charged for the biling cycle August 26th to September 26th.

c) Find the new balance on the account at the end of the August 26th - September 25th billing cycle.

Explanation / Answer

a. Statement Showing Average Daily Balance Time Period Purchase Daily Balance Number of Days ( for Interest) 25th August $2,000.00 0 12th September $500.00 $2,500.00 18 22nd September -$250.00 $2,250.00 28 b. Statement Showing Interest Charge for billing Cycle Till 22nd September ($2500*1.83%)*28days/31 days $41.32 Till 26nd September ($2500-$250)*1.83%)*3days/31 days $3.98 Total Interest $45.30 Note: Periodic Interest Rate= 22% /12=1.83% per Month c. Statement Showing New Balance for Billing Cycle ( 26Aug-26 Sep) Detail Amount Previous Balance $2,000.00 Purchase during the period $500.00 Payment made -$250.00 Financial Charges ( Interest ) $45.30 Total $2,295.30

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