Question

which method of calculating finance charge results in the lowest finance charge?
a. average daily balance
b. previous balance
c. ending balance
d. adjusted balance

please select the best answer from the choices provided

a
b
c
d

Explanation:

To determine which method gives the lowest finance charge, we analyze each:

• Average daily balance: Uses the average of daily balances, which can be moderate.
• Previous balance: Uses the balance from the prior period, often higher.
• Ending balance: Uses the final balance, which may be high.
• Adjusted balance: Subtracts payments/credits made during the period from the previous balance, resulting in a lower balance used for calculation. Thus, it typically yields the lowest finance charge.

Answer:

D. adjusted balance