Ch. 5 Loans

A prepayment penalty is a fee charged if you pay a loan off on time.

• True

• False

The daily interest factor tells you how much interest a note is accumulating per day.

• True

• False

Interest is the amount charged for using a lender's money.

• True

• False

The banker's interest method is also known as the ordinary interest method.

• True

• False

Some lenders require the borrower to pledge property as security for a loan. This property is referred to as

• collateral.

• a down payment.

• an installment.

• equity.

If the principal and the amount of interest for one year are known, the rate of interest can be found by

• dividing the principal by the interest for one year.

• dividing the interest for one year by the principal.

• multiplying the principal by the interest for one year.

• multiplying the interest for one year by the principal.

The yearly interest rate charged on a loan is referred to as the annual percentage rate (APR).

• True

• False

Which formula is used to calculate the finance charge per $100 of the amount financed?

• finance charge / (amount financed / $100).

• finance charge / (amount financed x $100).

• (finance charge / amount financed) x $100.

• (finance charge x amount financed) x $100.

To evaluate and compare loans from different lenders, you should consider

• all of the above.

• all additional fees associated with the loan.

• the annual percentage rate.

• the terms and conditions of the loan.

How many days are considered to be in a year according to the ordinary interest method?

• 355

• 360

• 365

• 366