(03.02 LC) Why do smart consumers often make a down payment when using credit to purchase a good?
0 It reduces risk to the consumer.
o It eliminates interest charges.
o It reduces the cost of the financed good.
o It reduces the interest paid to finance the good.

It reduces the interest paid to finance the good.

Explanation:

Interest is calculations are based on the amount borrowed(the principal amount). A higher principal amount attracts a higher interest fee. When purchasing via credit,  a smart customer will make a deposit payment to reduce the debt element in the transaction.

The item will be purchased partially by cash and party by credit. Since the interest amount is based on the credit advanced, a smart customer will pay reduced interest payments.

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