The Most Common Method Used by Lenders to Apply Finance

question 124

True/False

The most common method used by lenders to apply finance charges to credit cards is the average daily balance including new purchases method.

---

Definitions:

Compounded Quarterly

Involves calculating interest on an investment by adding the accrued interest back into the principal at the end of each quarter, effectively earning interest on interest.

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period, typically without the risk of losing the principal invested.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.

Nominal Interest Rate

The interest rate as stated on a loan or financial product, not taking into account inflation or fees.