20 questions
Which term determines the right of a lender to sell collateral to get back the principle if the borrower cannot repay the loan
collateral
interest
lien
What is credit?
an arrangement in which you receive money, good, or services now in exchange for the promise to pay later
an arrangement in which you receive goods or services in exchange for other goods or services
an arrangement in which you receive money now and pay it back later with fees
Carla has applied for a loan. Which condition makes it likely that she will get an unsecured loan?
She has a very good credit history
She is ready to pay a huge amount in interest
She is willing to put up her home as collateral for the loan
Lawrence got a car loan from a bank, with the car as collateral. What kind of loan did he get?
a secured loan
an unsecured loan
a fixed-rate loan
If the principal is $350 and the interest rate is 3 percent, what is the simple interest earned in one year?
simple interest = P × r × t
$10.50
$30.25
$105
Jenny borrowed $500 for five years at 4 percent interest, compounded annually. What is the total amount she will have paid when she pays off the loan?
total amount = P (1 + i)t
$608.33
$729.99
$765.77
Andrew has a four-year college loan for $20,000. The lender charges a simple interest rate of 5 percent. How much interest will he have to pay?
simple interest = P × r × t
. $800
$4,000
$10,000
What is the total amount that Matthew's bank will receive after lending him $8,000 for four years at an interest rate of 6 percent, compounded annually?
total amount = P (1 + i)t
$9,358.87
$10,099.80
$10,210.25
What is the current value of a future sum of money called?
current value
present value
future value
Miranda wants to give her 14-year-old daughter $20,000 when she turns 18. How much does she need to put in the bank now if the interest rate is 10 percent per year?
future value = P x (1+i)t
present value = P/(1+i)t
$12,418.43
$13,660.27
$15,026.30
What would be the value of $150 after eight years if you earn 12 percent interest per year?
present value = P x (1+i)t
future value = P/ (1+i)t
$371.39
$415.96
$465.88
You want to deposit $15,000 in a bank at an interest rate of 7 percent per year. What is the future value of this money after three years?
Present Value= P x (1+i)t
Future Value= p/ (1+i)t
$18,375.65
$19,661.94
$20,407.33
Suppose that you have the option to buy an item with either cash or credit. Under which condition would you use credit?
if you don't want to pay interest
if you want to build a good credit history
if you like carrying a lot of cash on you
Which of these people is likely to run into problems when using a credit card?
Sheila, who often indulges in impulse buying
Kaitlin, who doesn't have a good credit history
Max, who wants to buy important things even when he doesn't have cash
What is the monthly finance charge if the average daily balance is $20, the daily periodic rate is 0.04%, and the number of days in the cycle is 30?
12¢
24¢
60¢
Collectively, what are the interest costs and other fees for using a credit card called?
balance
credit line
finance charge
Ralph's loan application was rejected because he has a low FICO score. What could he do to increase his score?
apply for credit less frequently
increase his credit card balances
hold payment on his bills
Which term describes a person's previous pattern of borrowing and repaying?
credit practice
credit pattern
credit history
Jamie's parents have told him that he needs to pay his credit card bills on time to establish good credit. How will good credit help him in the future?
He will get free credit points.
He will get discounts on bills.
He will get loans more easily.
Which statement defines the term capacity?
a borrower's willingness to repay a loan
a borrower's ability to repay a loan
a borrower's total assets