Midterm_Financial Literacy

Front

What is simple interest?

Back

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

Front

How do you calculate the total interest paid on a loan?

Back

Total Interest = Principal Amount x Interest Rate x Time Period.

Front

What is a fixed expense?

Back

A fixed expense is a cost that does not change from month to month, such as rent or a car payment.

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What is a variable expense?

Back

A variable expense is a cost that can change based on usage or consumption, such as groceries or utility bills.

Front

What is the 50/30/20 rule in budgeting?

Back

The 50/30/20 rule suggests allocating 50% of income to needs, 30% to wants, and 20% to savings or debt repayment.

Front

What percentage of income should be allocated to savings or debt repayment according to the 50/30/20 rule?

Back

20%.

Front

What percentage of income should be allocated to needs according to the 50/30/20 rule?

Back

50%.

Front

What is the impact of a positive credit history on loan interest rates?

Back

A positive credit history typically results in lower interest rates on loans.

Front

What is the difference between a loan's principal and its interest?

Back

The principal is the original amount borrowed, while interest is the cost of borrowing that amount.

Front

What is the formula for calculating total loan repayment?

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Total Repayment = Principal + Total Interest.