Chapter 4 Test Review: Credit and Debt

Front

Which statement is true? Debt is beneficial for financial growth. Debt causes financial risk and stress. Debt is necessary for the American Dream. Debt should be ignored.

Back

Debt causes financial risk and stress.

Front

What is the first step in the debt snowball method?

Back

Pay off the smallest debt first

Front

What is the main purpose of the debt snowball method?

Back

To pay off debts quickly

Front

What is the First Foundation mentioned in the document?

Back

Save $500 Emergency Fund

Front

What should you do with the payment of a debt once it is gone? Options: Keep minimum payments on each debt monthly, Apply it to the next-smallest debt, Move to the next debt with the highest interest rate, Ignore it

Back

Apply it to the next-smallest debt

Front

What is the original amount of a loan called?

Back

Principal

Front

What is the additional cost a lender charges for borrowing their money?

Back

Interest

Front

What is the amount of time, in months, that you’ll be making payments?

Back

Term

Front

Which of the following is the loss of value of an asset over time? Depreciation, Negative Equity, Principal, Interest

Back

Depreciation

Front

Fill in the blank: When the value of an asset falls below what is owed on it, it is called ______.

Back

Negative Equity