Mathematics of Finance

Mathematics in the Modern World

Module 5
OVERVIEW
Mathematics of Finance or Financial Mathematics is the application of
mathematical methods to financial problems.
When you deposit money in a bank—for example, in a savings account—you
are permitting the bank to use your money. The bank may lend the deposited
money to customers to buy cars or make renovations on their homes. The bank
pays you for the privilege of using your money. The amount paid to you is called
interest. If you are the one borrowing money from a bank, the amount you pay
for the privilege of using that money is also called interest.
In this module, we will discuss the topics on financial matter including
percentage problem, simple interest, compound interest, and credit card &
consumer loans.
TOPIC OUTLINE
❖ Percentage Problem
❖ Simple Interest
❖ Compound Interest
❖ Credit Cards and Consumer loans
OBJECTIVES
At the end of this module, the students’ will be able to:

➢ Use mathematical concepts and tools in other areas such as in

finance;
➢ Solve different percentage problems;
➢ Compare and compute problems on simple and compound
interest; and
➢ Calculate the Average Daily Balance of Credit Cards bills and its
finance charges.
Percentage Problem
Lesson 1
Percentage, Base & Rate
In business and in our daily lives, we often compare numbers. Thus we use the
percentage formula. Computations of simple and compound interests, discounts, taxes,
and commission are based on the percentage formula. The percentage formula has
three variables, specifically the percentage (portion), the rate and the base.
The base(B) is the number that represents 100%, or the total value of something, or the
whole thing.
The percentage(P) (or portion) is the variable in the percentage formula that
represents a part of the base. It is always in the same unit with the base. For instance, if
the base is pesos, the percentage is pesos, if the base is meters, the percentage is
meters.
The rate(R) defines what part of the base is the percentage. The rate can be expressed
in percent, decimal or fraction of the base.
The following are the percentage formulas:
𝑃 𝑃
𝑃 = 𝐵𝑋𝑅 , 𝐵= and 𝑅=
𝑅 𝐵
Finding Percentage
Examples: R x B
1. What is 30% of 250?
(Note: The word “of” means multiplication)
Sol. 𝑃 = 0.30 𝑥 250 = 𝟕𝟓
(Always reduce percent value to its decimal form by dividing 100 or by moving 2 decimal
places to the left.)
R x B
2. 0.4% of 700 is equal to what number?
Sol. 𝑃 = 0.004 𝑥 700 = 𝟐. 𝟖

3. RFS Metal industries has 1,600 employees 60% constitute the production staff. How many
employees are in production?
Sol. Given: B= 1,600 and R= 60% or 0.60
𝑃 = 0. 6 𝑥 1,600 = 𝟗𝟔𝟎 𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒆𝒔

4. Gabby’s regular salary is P18,400. If he gets a 12% bonus, how much is the bonus?
Sol. Given: B=P18,400 and R=12% or 0.12
𝑃 = 0. 12 𝑥 18,400 = 𝑷𝟐, 𝟐𝟎𝟖 𝒊𝒔 𝑮𝒂𝒃𝒃𝒚′ 𝒔 𝒃𝒐𝒏𝒖𝒔
Finding the Base
Examples:
R x B = P
1. 24% of what number is 54.
(Note: The word “is” means equal)
54
Sol. 0.24 𝑥 𝐵 = 54 ⇒ 𝐵 = 0.24 = 225
R B = P
2. 2/9 as much as what number is 30?
2 30 9
Sol. 9 𝑥 𝐵 = 30 ⇒ 𝐵 = 2 = 30𝑥 2 = 135
9

3. A company’s profits amounted to 15% of its sales. If the profit were P20 million, compute the
company’s sales.

Sol. Given: R= 15% or 0.15 and P= P20 M

20,000,000
𝐵= = 𝑷𝟏𝟑𝟑, 𝟑𝟑𝟑, 𝟑𝟑𝟑. 𝟑𝟑 𝒄𝒐𝒎𝒑𝒂𝒏𝒚′ 𝒔 𝒔𝒂𝒍𝒆𝒔
0.15
Finding the Base
4. The salesperson made P94,500 in annual bonuses. If the bonus represents 21% of the
base salary, what was the base salary?

Sol. Given: R=21% or 0.21 and P=P94,500

94,500
𝐵 = 0.21 = 𝑷𝟒𝟓𝟎, 𝟎𝟎𝟎 𝒊𝒔 𝒕𝒉𝒆 𝒃𝒂𝒔𝒆 𝒔𝒂𝒍𝒂𝒓𝒚

5. The new blender cost P783.20, which is 12% less than the old blender. How much did
the old blender cost?

Sol. Given: R=12% or 0.12 and P=P783.20

783.20
𝐵 = 1−0.12 = 𝑷𝟖𝟗𝟎 𝒊𝒔 𝒕𝒉𝒆 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒐𝒍𝒅 𝒃𝒍𝒆𝒏𝒅𝒆𝒓
Finding the Rate
Examples:
R x B = P
1. What percent of 784 is 24?
24
Sol. 𝑅 𝑥 784 = 24 ⇒ 𝑅 = 𝑥100 = 𝟑. 𝟎𝟔%
784
P = R x B
2. 18 is what part of 60?
18 𝟑
Sol. 18 = 𝑅 𝑥 60 ⇒ 𝑅 = =
60 𝟏𝟎
𝑠𝑖𝑛𝑐𝑒 𝑡ℎ𝑒 𝑞𝑢𝑒𝑠𝑡𝑖𝑜𝑛 𝑖𝑠 𝑤ℎ𝑎𝑡 𝑝𝑎𝑟𝑡, 𝑡ℎ𝑒𝑛 𝑡ℎ𝑒 𝑎𝑛𝑠𝑤𝑒𝑟 𝑖𝑠 𝑎 𝑓𝑟𝑎𝑐𝑡𝑖𝑜𝑛

3. ¼ of 50 is what percent of 1/3 of 90?

1 1
Sol. Given: 𝑃 = 4 𝑜𝑓 50 = 12.5 and 𝐵 = 3 𝑜𝑓 90 = 30
12.5
𝑅= 𝑥 100 = 𝟒𝟏. 𝟔𝟕%
30
Finding the Rate
4. Cyrus shoots 17 out of 20 shots in a basketball game. What was his shooting percentage?
Given: P= 17 and B= 20
17
Sol. 𝑅 = 20 𝑥100 = 𝟖𝟓%

5. The price of an electric fan decreased from P1,500 to P1,080. What is the rate of discount?
Given: B= P1,500 and P= P1,080
1,500−1,080
Sol. 𝑅 = 1,500 𝑥100 = 𝟐𝟖% 𝒊𝒔 𝒕𝒉𝒆 𝒓𝒂𝒕𝒆 𝒐𝒇 𝒅𝒊𝒔𝒄𝒐𝒖𝒏𝒕

You need to find first the discount amount by subtracting original price by
the new price
Simple Interest
Lesson 2
,

Simple Interest
Business concerns and individuals who find themselves in need of cash
or financial credit, borrow money and agree to pay a certain percentage for the
privilege of using the borrowed amount.
Interest is the sum paid for the use of money. It is an expense to the
one who borrows money and income to the one who lends the money. The
amount of money borrowed or invested is called principal (P).
Interest that is paid as a percent of amount borrowed or invested is
called simple interest.
,

Simple Interest
The formula for simple interest is given by the following:

𝐼 = 𝑃𝑟𝑡
𝑤ℎ𝑒𝑟𝑒: 𝐼 = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑎𝑟𝑛𝑒𝑑
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑜𝑟 𝑎𝑚𝑜𝑢𝑛𝑡 𝑖𝑛𝑣𝑒𝑠𝑡
𝑟 = 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑡 = 𝑡𝑖𝑚𝑒 𝑜𝑟 𝑡𝑖𝑚𝑒 𝑓𝑟𝑎𝑚𝑒 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠

Other formulas are:

I I I
P= , r= , t=
rt Pt Pr
,

Simple Interest
Example #1. Finding Simple Interest

Upon receiving his 13th month pay of Php 50,000, Gabby wanted to invest
the amount in an institution that gives a simple interest of 8.5% per year.
The interest rate was given to Gabby by the financial institution provided
that he will not withdraw his money within 2 years. How much is Gabby’s
earnings after 2 years?
,

Simple Interest
Solution:
The following can be obtained from the problem:
𝑃 = 𝑃50,000 𝑟 = 8.5% 𝑜𝑟 0.085 & 𝑡 = 2 𝑦𝑒𝑎𝑟𝑠

Using the formula: I = Prt

𝐼 = 50,000 0.085 2
𝐼 = 8,500
Therefore the investment will earn Php 8,500 in 2 years.
,

Simple Interest
At the end of the term the investor will receive his money together with
the earned interest. This amount is what we call the final amount F or the
maturity value.
The formula is:
𝐹 = 𝑃 + 𝐼 or
𝐹 = 𝑃(1 + 𝑟𝑡)
𝑤ℎ𝑒𝑟𝑒: 𝐹 = 𝑓𝑖𝑛𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡
𝑃 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙
𝐼 = 𝑠𝑖𝑚𝑝𝑙𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Other Formulas:
𝐹
𝐼 =𝐹−𝑃 , 𝑃 =𝐹−𝐼 , 𝑃=
(1+𝑟𝑡)
,

Simple Interest
Example #2. Finding Final Amount

Jenny wants to purchase a Laptop Computer by obtaining a simple

interest loan. The cost is Php38,000 and the annual interest rate on the loan
is 7%. However, she only wants to have the loan for 1 year and 6 months.
How much would she pay after 1 year and 6 months?
,

Simple Interest
Solution:
The following can be obtained from the problem:
𝑃 = 𝑃38,000 𝑟 = 7% 𝑜𝑟 0.07 & 𝑡 = 1 𝑦𝑒𝑎𝑟 & 6 𝑚𝑜𝑛𝑡ℎ𝑠 𝑜𝑟 1.5𝑦𝑟

Use the formula: F = P 1 + rt

𝐹 = 38,000 [1 + 0.07 1.5 ]
𝐹 = 41,990

From this, you can conclude that Jenny will pay Php41,990 after 1 year and 6
months.
,

Simple Interest
Example #3. Finding Simple Interest Rate
What is the simple interest rate on Php25,000 for 4 years and 3 months if money
earns Php5,200 ?

Solution:
The problem provides the following info: P = P25,000 , I = P5,200, and
3
t = 4 12 𝑦𝑟𝑠 𝑜𝑟 4.25 𝑦𝑟𝑠
𝐼 5,200
Solve for rate: 𝑟= 𝑃𝑡
𝑥100% = (25,000)(4.25)
𝑥 100 = 4.89%

Thus, the annual interest rate is approximately 4.89%.

,

Simple Interest
Example #4 Finding the Principal Amount
The loan accumulates Php18,734. If the loan was for 18 months at 6.8% interest in a
year, how much was the principal?

Solution:
The given in the problem are: F = P18,734 , r = 6.8% or 0.068, and
18
t= 𝑦𝑟𝑠 𝑜𝑟 1.5
12
𝐹 18,734
Solve for Principal: 𝑃= = = 17,000
1+𝑟𝑡 1+(0.068)(1.5)

Therefore, the principal amount was P17,000.

,

Simple Interest
Example #5. Finding the Time or Term
How long will it take for Php5,000 to double its amount if the annual interest rate is
12.5%?

Solution:
The given information in the problem are: P = P5,000 , r = 12.5% or 0.125, Since
the amount will double it means that the interest and principal are equal.
𝐼 5,000
Solve for time: 𝑡 = 𝑃𝑟
= (5,000)(0.125)
=8

Therefore, the principal will double its amount after 8 years if it is earning 12.5%
annually.
Compound Interest
Lesson 3
,

Compound Interest
Simple interest is generally used for loans of 1 year or less. For loans of
more than 1 year, the interest paid on the money borrowed is called
compound interest. Compound interest is interest calculated not only on the
original principal, but also on any interest that has already been earned

To illustrate:
Take for example, a Php1,000 is invested at 10% interest compounded
quarterly. How much will be the amount after a year?

 Solution:
The principal earned interest every 3 months. Interest is earned at the rate
of 10% per year or at the rate of 2.5% per period or every 3 months, on all
principals.
,

Compound Interest
 First Period: At the end of the first 3 months, the interest due is
I = (P1,000) (0.10) (3/12) = P25.00
The new principal is 1,000+ 25 = P1,025.
 Second Period: At the end of 6 months, the principal is no longer P1,000
but P1,025 and the interest due is
I = (P1,025) (0.10) (3/12) = P25.625
The new principal is P1,025 + 25.625 = P1,050.625.
 Third Period: At the end of 9 months, the new principal is P1,050.625 and
the interest due is
I = (P1,050.625) (0.10) (3/12) = P26.266
The new principal is P1,050.625 + 26.266 = P1,076.891.
,

Compound Interest
 Fourth Period: At the end of 12 months, the principal is P1,076.891 and
the interest due is
I = (P1,076.891) (0.10) (3/12) = P26.922
The amount will be added to the principal and that will be the final
amount after a year.

Thus, the final amount F after 4 conversion periods at 10% interest rate
is P1,103.813.
,

Compound Interest
 The compound interest earned in 1 year or in four conversion periods is
25+ 25.625 + 26.266 + 26.922 = P103.81

 If we will compute the interest using the simple interest formula, the
result is:
𝐼 = 1,000 0.10 1 = 𝑃100

Comparing the results, we can conclude that compound interest

generates greater amount than the simple interest.
,

Compound Amount & Compound Interest Formulas:

For easy calculation of Compound Amount, we will be using the following
formula:

𝑭 = 𝑷 (𝟏 + 𝒊)𝒏 and 𝑰=𝑭−𝑷

𝒋
where, 𝒊=𝒎 𝒏 = 𝒎𝒕

𝑭 = 𝐹𝑖𝑛𝑎𝑙 𝑜𝑟 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝐴𝑚𝑜𝑢𝑛𝑡

𝑷 = 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝐴𝑚𝑜𝑢𝑛𝑡
𝒊 = 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑
𝒋 = 𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑟𝑎𝑡𝑒
𝒎 = 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑
𝒏 = 𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑤ℎ𝑜𝑙𝑒 𝑡𝑒𝑟𝑚
𝒕 = 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑜𝑟 𝑡𝑒𝑟𝑚 𝑜𝑓 𝑙𝑜𝑎𝑛
𝑰 = 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡

The conversion period m can be in terms of quarterly (4 periods), semi-annually (2 periods), or

monthly (12 periods).
,

Compound Amount & Compound Interest

Example #1. Finding Compound Amount

On March 1, 2014, Mrs. Santos borrowed P20,000 at 12%

compounded quarterly. How much does she still owes for December 1,
2015?

Solution:

The given information from the problem are:

𝑃 = 20,000 , 𝑗 = 12% 𝑜𝑟 0.12 , 𝑚 = 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑜𝑟 4
21
and 𝑡 = 𝑀𝑎𝑟𝑐ℎ 1, 2014 𝑢𝑛𝑡𝑖𝑙 𝐷𝑒𝑐𝑒𝑚𝑏𝑒 1, 2015 = 21 𝑚𝑜𝑠. or 12

What is asked is the amount she owes or the compound amount.

,

Compound Amount & Compound Interest

𝑗 0.12
Solve for i: 𝑖= = = 0.03
𝑚 4

21 84
Solve for n: 𝑛 = 𝑚𝑡 = 4 = =7
12 12

Solve for F: F = 𝑃(1 + 𝑖)𝑛 = 20,000(1 + 0.03)7 = 24,597.84

We can conclude that Mrs. Santos owe Php24,597.48.

,

Compound Amount & Compound Interest

Example #2. Finding Compound Amount & Interest

Find the amount due and the interest at the end of 6 ¾ years if Php32,000
is invested at 12% compounded monthly.

Solution:

The given from the problem are:

𝑃 = 32,000 , 𝑗 = 12% 𝑜𝑟 0.12 , 𝑚 = 12 (𝑚𝑜𝑛𝑡ℎ𝑙𝑦)
3
and 𝑡 = 6 𝑦𝑒𝑎𝑟𝑠 or 81 𝑚𝑜𝑛𝑡ℎ𝑠
4

The required is the compound amount and compound interest.

𝑗 0.12 27
Solve for i and n: 𝑖= = = 0.01 and 𝑛 = 𝑚𝑡 = 12 = 81
𝑚 12 4

then F: F = 𝑃(1 + 𝑖)𝑛 = 32,000(1 + 0.01)81 = 71,644.24

And I 𝐼 = 𝐹 − 𝑃 = 71,644.24 − 32,000 = 39,644.24

Therefore the amount due is Php71,644.24 and the interest is Php39,644.24.

,

Finding Present Value of Compound Interest

The present value of an investment is the original principal invested, or

the value of the investment before it earns any interest. Therefore, it is the
principal, P, in the compound amount formula. Present value is used to
determine how much money must be invested today in order for an
investment to have a specific value at a future date.

The formula for the present value of an investment is found by solving

the compound amount formula for P:

𝐹
𝐹 = 𝑃 (1 + 𝑖)𝑛
⇒ P=
(1 + 𝑖)𝑛
or ⇒ 𝑃 = 𝐹(1 + 𝑖)−𝑛
,

Compound Amount & Compound Interest

Example #3. Finding the Principal or Present Value

In order to accumulate P100,000 in 3 years and 6 months, how much should

one invest today at 9% compounded semi-annually?

Solution:

The given from the problem are:

𝐹 = 100,000 , 𝑗 = 9% 𝑜𝑟 0.09 , 𝑚 = 2 (𝑠𝑒𝑚𝑖 − 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦)
and 𝑡 = 3 𝑦𝑒𝑎𝑟𝑠 & 6 𝑚𝑜𝑛𝑡ℎ𝑠 or 3.5 𝑦𝑟𝑠

What is asked is the Principal.

𝑗 0.09
Solve for i and n: 𝑖= = = 0.045 and 𝑛 = 𝑚𝑡 = 2 3.5 = 7
𝑚 2

then P: P = 𝐹(1 + 𝑖)−𝑛 = 100,000(1 + 0.045)−7 = 73,482.85

We can conclude that in order to accumulate Php100,000, one should invest

Php73,482.85 today.
Credit Card & Consumer Loans
Lesson 4
,

Consumer Loans
What is consumer loan?

A consumer loan is a loan given to consumers to finance specific types

of expenditures. In other words, a consumer loan is any type of loan made
to a consumer by a creditor. The loan can be secured (backed by the
assets of the borrower) or unsecured (not backed by the assets of the
borrower).
 Types of Consumer Loans
• Mortgages: Used by consumers to finance the purchase of a house
• Credit cards: Used by consumers to finance everyday purchases
• Auto loans: Used by consumers to finance the purchase of a vehicle
• Student loans: Used by consumers to finance education
• Personal loans: Used by consumers for personal purposes
,

Consumer Loans
Categories of Consumer Loan:

1. Open-end Loan
An open-end consumer loan, also known as revolving credit, is a loan in
that the borrower can use for any type of purchases but must pay back a
minimum amount of the loan, plus interest, before a specified date. Open-
end loans are generally unsecured. If a consumer is unable to pay off the
loan in full before the specified date, interest is charged.

A credit card is an example of an open-end consumer loan.

The consumer is able to make purchases on a credit card but must pay the
outstanding amount when it becomes due. If the consumer fails to settle the
outstanding amount on the credit card, he/she would be charged interest until
the amount is paid off.
,

Consumer Loans
2. Closed-end Loan

A closed-end consumer loan, also known as installment credit, is used

to finance specific purchases. In closed-end loans, the consumer makes
equal monthly payments over a period of time. Such loans are generally
secured. If a consumer is unable to pay the installment amounts, the
lender can seize the assets that were used as collateral.
,

Credit Card
When a customer uses a credit card to make a purchase, the customer is
actually receiving a loan. Therefore, there is frequently an added cost to the
consumer who purchases on credit. This added cost may be in the form of an
annual fee or interest charges on purchases. A finance charge is an amount
paid in excess of the cash price; it is the cost to the customer for the use of
credit.

Most credit card companies issue monthly bills. The due date on the bill
is usually 1 month after the billing date (the date the bill is prepared and
sent to the customer). If the bill is paid in full by the due date, the customer
pays no finance charge. If the bill is not paid in full by the due date, a
finance charge is added to the next bill.
,

Credit Card
Suppose a credit card billing date is the 10th day of each month. If a
credit card purchase is made on April 15, then May 10 is the billing date (the
10th day of the month following April). The due date is June 10 (one month
from the billing date). If the bill is paid in full before June 10, no finance
charge is added. However, if the bill is not paid in full, interest charges on
the outstanding balance will start to accrue (be added) on June 10, and any
purchase made after June 10 will immediately start accruing interest.

The most common method of determining finance charges is the average

daily balance method. Interest charges are based on the credit card’s
average daily balance, which is calculated by dividing the sum of the total
amounts owed each day of the month by the number of days in the billing
period.
,

Credit Card
The most common method of determining finance charges is the average daily
balance method. Interest charges are based on the credit card’s average daily
balance, which is calculated by dividing the sum of the total amounts owed each
day of the month by the number of days in the billing period.

Average Daily Balance

𝑠𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡𝑠 𝑜𝑤𝑒𝑑 𝑒𝑎𝑐ℎ 𝑑𝑎𝑦 𝑜𝑓 𝑡ℎ𝑒 𝑚𝑜𝑛𝑡ℎ

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑎𝑖𝑙𝑦 𝐵𝑎𝑙𝑎𝑛𝑐𝑒 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑏𝑖𝑙𝑙𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑
,

Credit Card
An example of calculating the average daily balance follows.

Suppose an unpaid bill for $315 had a due date of April 10. A purchase of
$28 was made on April 12, and $123 was charged on April 24. A payment of
$50 was made on April 15. The next billing date is May 10. The interest on
the average daily balance is 1.5% per month. Find the finance charge on the
May 10 bill.

Solution:
To find the finance charge, first prepare a table showing the unpaid
balance for each purchase, the number of days the balance is owed, and the
product of these numbers. A negative sign in the Payments or Purchases
column of the table indicates that a payment was made on that date.
,

Credit Card

The sum of the total amounts owed each day of the month is $10,952. Find the
average daily balance.
𝑠𝑢𝑚 𝑜𝑓 𝑡ℎ𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡𝑠 𝑜𝑤𝑒𝑑 𝑒𝑎𝑐ℎ 𝑑𝑎𝑦 𝑜𝑓 𝑡ℎ𝑒 𝑚𝑜𝑛𝑡ℎ
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑎𝑖𝑙𝑦 𝐵𝑎𝑙𝑎𝑛𝑐𝑒 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑏𝑖𝑙𝑙𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑
10,952
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑎𝑖𝑙𝑦 𝐵𝑎𝑙𝑎𝑛𝑐𝑒 = = $365.07
30
Credit Card & Consumer Loans

Find the finance charge.

I = Prt
I = (365.07) (0.015) (1)
I = $5.48

The finance charge on the May 10 bill is $5.48.

Credit Card & Consumer Loans
Try This!!!
An unpaid bill for Php 620 had a due date of March 10. A purchase of Php 214
was made on March 15, and Php 67 was charged on March 30. A payment of Php
200 was made on March 22. The interest on the average daily balance is 1.5% per
month. Find the finance charge on the April 10 bill.
Thank You!!!
References:
▪ Mathematics in the Modern World (2018), CENGAGE, Rex Bookstore
▪ Arao, R. et. al. (2015). Mathematics of Investment. Manila: Rex
Bookstore.
▪ Nocom, F.P. et. al. (2001). Essentials of College Modern Mathematics
of Investment. Quezon City: Katha Publishing.