If a card has an average daily balance of $2,500.00 credit and the annual interest rate is 18%, what will the total bill for the month be?

Question

Eli Assouline · Accepted Answer

# $537.50#

Depends on how you interpret the wording in the question.

Assumption: You owe the bank an average of $2500 every month.

Assumption: The annual interest is calculated as compound monthly.

Using #P(1+%/12)^(m)#

Where #%# is the annual percentage given as 18% #m# is the count of months set at 1

Technically the general equation (above) would also include calculation adjustment due to repayment. The context of this question is such that it is not needed.

Note that as the debt is fixed at £2500 due to repayments. As such the interest is actually the equivalent of simple but at #1/12# the annual rate calculated monthly.

Thus the amount owed each month is:

#$2500(1+18/(12xx100))^1 -$2500= $537.50#