Finance Flashcard AMDM

Front

What is the formula to calculate monthly payments on a loan?

Back

M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly payment, P is the principal loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What is credit card debt?

Back

Credit card debt is the amount of money owed to credit card companies for purchases made using credit cards, which typically accrues interest.

Front

What is the impact of a high-interest rate on credit card debt?

Back

A high-interest rate increases the total amount of money that must be repaid over time, making it more difficult to pay off the debt.

Front

What is the difference between simple interest and compound interest?

Back

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal and also on the accumulated interest.

Front

What does APR stand for and what does it represent?

Back

APR stands for Annual Percentage Rate, which represents the yearly interest rate charged on borrowed money.

Front

What is the purpose of a credit score?

Back

A credit score is a numerical representation of a person's creditworthiness, used by lenders to assess the risk of lending money.

Front

What is the term for the age at which a person typically stops working full-time?

Back

Retirement.

Front

What are the potential disadvantages of using a credit card?

Back

Disadvantages include the risk of accumulating debt, high-interest rates, and potential damage to credit history if payments are missed.

Front

What is the cost of borrowing money called?

Back

Interest.

Front

How can one build a good credit history?

Back

By making timely payments, keeping credit utilization low, and maintaining a mix of credit types.