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Ending Balance vs. Average Daily Balance

Ending Balance vs. Average Daily Balance . Where do they get that finance charge from anyway?. Ending Balance. Finance charges are computed on the basis of your ending balance as of the statement date. Use a periodic interest of 1.5%(____ for 12 mo). Average Daily Balance.

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Ending Balance vs. Average Daily Balance

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  1. Ending Balance vs. Average Daily Balance Where do they get that finance charge from anyway?

  2. Ending Balance • Finance charges are computed on the basis of your ending balance as of the statement date. • Use a periodic interest of 1.5%(____ for 12 mo)

  3. Average Daily Balance • Company takes into account all activity in the months time to get an average daily balance. Finance charge is computed on that value.

  4. Finishing the computations • ADB= sum of daily balances/number of days • Finance charge = ADB (rate) For this problem, lets use 2% for the periodic rate.

  5. Minimum balance payments • How long will it take to pay off a debt of $1000 if you only make the minimum ($20) payment and are charged 1.67% periodic rate? Compute 1 year of monthly payments. How much do you still owe?

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