Copyright © 2008, The McGraw-Hill Companies, Inc.
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Topic Key Ideas, Formulas, and Techniques Examples
Average Daily Balance, p. 420 • ADB is the weighted average of the daily
balances.- Set up a table as shown in the text to aid in
the calculation.
Joanna has a credit card
whose billing period begins
on the 17th day of each
month. On July 17 her
balance was $815.49. She
made a $250 payment on
July 28. She also made
new charges of $27.55
on July 21, $129.99 on
August 5, and $74.45
on August 8. Find her
average daily balance.
(Example 10.1.1)Credit Card Interest, p. 423 • Interest is calculated as simple interest on the
average daily balance.- ADB is used only to calculate interest; it is not
the amount owed. - If payments are made in full within the grace
period, interest may be waived altogether.
Suppose that Joanna’s
credit card (from
Example 10.1.1) carries
an interest rate of
15.99%. How much
interest would she owe
for the billing month
from Example 10.1.1?
What would her balance
be on her August 17
monthly statement?
(Examples 10.1.2
and 10.1.3)Commissions, p. 425 • Card companies charge merchants fees
called commissions for accepting credit card
payment.- Commissions may be a fl at amount or a
percent.
Tr avis bought a pair of
shoes for $107.79 and
charged them to his credit
card. The credit card
company charges the shoe
store 45 cents for each
transaction, plus 1.25% of
the amount charged. How
much will the credit card
company pay to the shoe
store? (Example 10.1.5)Choosing the Best Deal, p. 425 • To choose the best deal, you must consider
whether the cost of a higher annual fee will
make up for the expense of a higher interest
rate.- The “best” choice depends on the average
balance carried on the card.
How large a balance
would I need to carry to
prefer an $80 annual fee
with a 9% interest rate
over a $25 annual fee
with a 15% interest rate?
(Example 10.1.7)CHAPTER 10
SUMMARY(Continued)