Personal Finance Reviewer Part 2

Front

What is simple interest?

Back

Simple interest is calculated using the formula: Interest = Principal x Rate x Time. It is a way to calculate the interest charge on a loan or the interest earned on an investment.

Front

How do you calculate the total amount owed on a loan with simple interest?

Back

Total Amount Owed = Principal + (Principal x Rate x Time). For example, if you borrow $10,000 at a 5% interest rate for 10 years, you will owe $15,000.

Front

What is a financial contract?

Back

A financial contract is a formal agreement between two or more parties that outlines the terms and conditions of a financial transaction, such as a loan.

Front

What type of credit is typically used for purchasing a car?

Back

Installment credit is typically used for purchasing a car, where the borrower pays back the loan in fixed monthly payments over a set period.

Front

What is a mortgage?

Back

A mortgage is a type of loan specifically used to purchase real estate, where the property serves as collateral for the loan.

Front

How do mortgage payments affect net worth?

Back

Mortgage payments are considered liabilities, which can reduce a person's net worth until the loan is paid off.

Front

What is layaway?

Back

Layaway is a service that allows customers to reserve merchandise by making a deposit and paying the balance over time before taking the item home.

Front

What is the difference between a loan proposal and a loan contract?

Back

A loan proposal is a suggestion for a loan, while a loan contract is a legally binding agreement that outlines the terms of the loan.

Front

What is the purpose of a loan agreement?

Back

A loan agreement outlines the terms of the loan, including the amount borrowed, interest rate, repayment schedule, and consequences of default.

Front

What is the principal in a loan?

Back

The principal is the original sum of money borrowed or invested, excluding any interest or fees.