Unit 4: Interest and Credit

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