Ron Larson
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6.2 Buying Now, Paying Later

6.2 Buying Now, Paying Later
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  • 19. Credit Cards

    The tables show all the activity in two credit card accounts for an entire billing period. When a billing period ends, the ending balance plus any additional charges becomes the starting balance of the next billing period. The account owners have 25 days from the end of the billing period to make a payment. Are the payments shown made on time?

    • Worked-Out Solution

      For the Gold Card: The billing period ended on March 31, so a payment must be made by April 25. A payment was made on April 8, so the payment was made on time.

      For the World Card: The billing period ended on July 20, so a payment must be made by August 14. A payment was made on August 3, so the payment was made on time.

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 `-` --`   `-----`   `-`  --`   `---`   `-`  `-`
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  • 20. Credit Cards

    The tables show all the activity in two credit card accounts for an entire billing period. Each credit card account has no interest charge as long as the balance of the previous billing period was paid in full. Do the accounts have interest charges for the billing periods shown? Explain.

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|  \/  ||  / //\ \\    | ||   | || | ||    /   || 
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`-`  `-`  `-`   `-`  `--`       `---`       -|_|| 
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  • 21. Credit Card

    The tables show all the activity in two credit card accounts for an entire billing period. The owner of the Gold Card receives a billing statement for the month of May. The statement includes an interest charge. What can you determine about the amount paid on the April statement?

    • Worked-Out Solution

      The bill shown above is for April. It had an ending balance of $115. If the bill for May shows an interest charge, then the credit card holder must not have paid April's ending balance of $115 (in full) during the month of May.

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      _  _     _____    _____     _    _   __    __  
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 |  ' ||  | ||__   | |  \ || | || | ||  \ \/ //  
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 |_|\_||  |_____|| |_____//   \____//     \//    
 `-` -`   `-----`   -----`     `---`       `
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  • 22. Daily Periodic Rate

    The daily periodic rate (DPR) of a credit card is the daily interest rate, which is the APR divided by the number of days in a year. The APR of each credit card is 19.99%. Find the DPR of each credit card.

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      _  __   _    _              __   __    _  _   
 | |/ // | || | ||   ____     \ \\/ //  | \| || 
 | ' //  | || | ||  |    \\    \ ` //   |  ' || 
 | . \\  | \\_/ ||  | [] ||     | ||    | .  || 
 |_|\_\\  \____//   |  __//     |_||    |_|\_|| 
 `-` --`   `---`    |_|`-`      `-`'    `-` -`  
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  • 23. Average Daily Balance

    The tables show all of the activity in two credit card accounts for an entire billing period. The average daily balance of a credit card account in a billing period is the sum of the balances at the end of each day in the billing period divided by the number of days in the billing period. Find the average daily balance of each account.

    • Worked-Out Solution

      This formula is complicated. The only reasonable way to compute the average daily balance is to use a spreadsheet.

      For the Gold Card: The average daily balance was $127.67.

      For the World Card: The average daily balance was $643.55.

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      _  __    ______    _  _    __   __    _____   
 | |/ //  /_   _//  | \| ||  \ \\/ //  |__  //  
 | ' //    -| ||-   |  ' ||   \ ` //     / //   
 | . \\    _| ||_   | .  ||    | ||     / //__  
 |_|\_\\  /_____//  |_|\_||    |_||    /_____|| 
 `-` --`  `-----`   `-` -`     `-`'    `-----`
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  • 24. Finding the Interest Charge

    The interest charge on each credit card account is the product of the average daily balance, the DPR, and the number of days in the billing period. Find the interest charge for the World Card.

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                 ___      _____    __   __    ______  
    ___     / _ \\   /  ___||  \ \\/ //  /_____// 
   /   ||  | / \ || | // __     \ ` //   `____ `  
  | [] ||  | \_/ || | \\_\ ||    | ||    /___//   
   \__ ||   \___//   \____//     |_||    `__ `    
    -|_||   `---`     `---`      `-`'    /_//     
     `-`                                 `-`
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