Chapter 6 Financial Planning Exercise 11 Calculate credit card finance charge Parker Young recently received his monthly MasterCard bill for the period June 1-30, 2017, and wants to verify the monthly finance charge calculation, which is assessed at a rate of 17 percent per year and based on ADBs, including new purchases. His outstanding balance, purchases, and payments are as follows: Previous balance: $346 Purchases: Payments: June 4 $278 June 21 $20 June 12 June 20 June 26 a. What is his ADB for the period? (Use a table like the one in Exhibit 6.8 for your calculations.) Round the answer to 2 decimal places. $ b. What is his finance charge for the period? (Use a table like the one in Exhibit 6.8 for your calculations.) Round the answer to 2 decimal places. EXHIBIT 6.8 Finding the Average Daily Balance and Finance Charge The average daily balance including new purchases is the method most widely used by credit card issuers to deter- mine the monthly finance charge on an account. Number of Days (1) Balance (2) $1,582 $2,332 $2,732 $2,457 Calculation (1) (2) (3) $7,910 $16,324 $40,980 $9,828 $75,042 Total Average daily balance => $75,042 = $2.420.71 31 Finance charge: $2,420.71 x .015 = $36.31