Tutorial Exercise Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime rate plus 4%. The starting balance on October 1 was $9,200. On October 4 they made a payment of $1,300. On October 13 the business borrowed $2,800, and on October 19 they borrowed $4,500. If the current prime rate is 7%, what is the new balance? Step 1 The new balance of the account will be found using the previous balance, finance charge, loans, and any payments. The previous balance, loans, and payments are given, so the finance charge must be found. The finance charge is calculated using the average daily balance and the periodic rate. To find the average daily balance, we must first determine the dates and number of days for each different unpaid balance. The beginning date for each unpaid balance is the date at which some activity occurred. The end date is the day prior to the next activity. The number of days refers to the number of days that will have the same unpaid balance. The starting balance on October 1 was $9,200. This is the unpaid balance until the first activity on the account, a payment of $1,300 made on October 4. Therefore, the starting balance spans October 1-3, a period of 3 days. The next activity on the account occurred on October 13 when $2,800 was borrowed. Therefore, the unpaid balance after the $1,300 payment spans October 4 through 12, a period of x days. The final activity on the account occurred on October 19 when $4,500 was borrowed. Therefore, the unpaid balance after borrowing $2,800 spans October 13 through October 16 a period of x days. The unpaid balance after borrowing $4,500 will span the rest of October. Recall there are 31 days in October, so this unpaid balance spans October 19 to 31, a period of x days.