Chapter 4 Exam

Front

What is the formula to calculate the finance charge on a credit card?

Back

Finance Charge = Average Daily Balance × Monthly Periodic Rate.

Front

How do you calculate the Average Daily Balance?

Back

Average Daily Balance = (Sum of Daily Balances) / (Number of Days in Billing Cycle).

Front

What is the Monthly Periodic Rate if the APR is 18%?

Back

Monthly Periodic Rate = APR / 12 = 18% / 12 = 1.5%.

Front

What is the formula for calculating the Monthly Periodic Rate from APR?

Back

Monthly Periodic Rate = APR / 12.

Front

If the APR is 9.50%, what is the Monthly Periodic Rate?

Back

Monthly Periodic Rate = 9.50% / 12 = 0.7917%.

Front

What is the significance of the Average Daily Balance in credit card billing?

Back

It determines the finance charge based on the balance carried over during the billing cycle.

Front

How do you find the total finance charge for a billing period?

Back

Total Finance Charge = Average Daily Balance × Monthly Periodic Rate × Number of Days in Billing Cycle.

Front

What is the Average Daily Balance for the following daily balances: 5 days @ $292.65, 15 days @ $1356.75, 4 days @ $852.12, 7 days @ $325.00?

Back

Average Daily Balance = (5×292.65 + 15×1356.75 + 4×852.12 + 7×325.00) / 28 = $887.03.

Front

What is the formula for calculating the Average Daily Balance when given multiple daily balances?

Back

Average Daily Balance = (Sum of (Days × Daily Balance)) / Total Days.

Front

What does APR stand for in finance?

Back

APR stands for Annual Percentage Rate.