Nancy Tai has recently opened a revolving charge account with MasterCard. Her credit limit is $1000, but she has not charged that much since opening the account. Nancy hasn't had the time to review her monthly statements as promptly as she should, but over the upcoming weekend, she plans to catch up on her work.

In reviewing November's statement, she notices that her beginning balance was $600 and that she made a $200 payment on November 10. She also charged purchases of $80 on November 5, $100 on November 15, and $50 on November 30. She can't tell how much interest she paid in November because she spilled watercolor paint on that portion of the statement. She does remember, though, seeing the letters APR and the number 16%. Also, the back of her statement indicates that interest was charged using the average daily balance method including current purchases, which considers the day of a charge or credit.

1. Assuming a 30-day period in November, calculate November's interest using the average daily balance method. Also, calculate the interest Nancy would have paid with: a) the previous balance method, b) the adjusted balance method.
2. Going back in time, when Nancy was just about to open her account, and assuming she could choose among credit sources that offered different monthly balance determinations, and assuming further that Nancy would increase her outstanding balance over time, which credit source would you recommend? Explain.

SHOW ALL WORK FOR EACH ASSIGNMENT AND EXPLAIN EACH STEP CAREFULLY.

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To calculate the interest using the average daily balance method, we need to follow these steps:

Step 1: Determine the number of days in the billing cycle (November). In this case, it's 30 days.

Step 2: Calculate the average daily balance for the billing cycle:

Starting Balance: $600 (as mentioned in the statement on November 1)
Charges: $80 (November 5), $100 (November 15), $50 (November 30)
Payment: $200 (on November 10)

Daily Balance = (Starting Balance - Payment) + (Charges on that day) = (600 - 200) + 80 = $480 (November 1st)
Daily Balance = $480 (November 2nd)
Daily Balance = $480 (November 3rd)
.
.
.
Daily Balance = $480 (November 10th)
Daily Balance = ($480 - $80) + $100 = $500 (November 11th)
.
.
.
Daily Balance = ($500 - $80 - $100 - $50) = $270 (November 30th)

Average Daily Balance = (Sum of Daily Balances) / Number of Days
Average Daily Balance = ($480 + $480 + ... + $270) / 30

Step 3: Calculate the interest using the average daily balance:

Interest = Average Daily Balance * Monthly Interest Rate * Billing Cycle Days
Monthly Interest Rate = (APR / 12) = (16% / 12) = 0.0133

Interest = Average Daily Balance * 0.0133 * 30

To calculate the interest with different methods, we need to know the previous balance and the adjusted balance:

a) Previous Balance Method:
Interest = Previous Balance * Monthly Interest Rate
Previous Balance = Starting Balance - Payment = $600 - $200 = $400

b) Adjusted Balance Method:
Interest = Adjusted Balance * Monthly Interest Rate
Adjusted Balance = (Starting Balance - Payment) + Purchases = ($600 - $200) + ($80 + $100 + $50)

Now, let's calculate the interest using the information provided:

1. Average Daily Balance Method:
- Calculate Average Daily Balance as explained above.
- Use the formula: Interest = Average Daily Balance * 0.0133 * 30

2. Previous Balance Method:
- Use the formula: Interest = Previous Balance * Monthly Interest Rate
3. Adjusted Balance Method:
- Use the formula: Interest = Adjusted Balance * Monthly Interest Rate

For step 2, to determine which credit source to recommend, we need more information about the other credit sources and their balance determination methods. Please provide more information for a proper recommendation.