Chapter 4 Review

Evelyn, Abigail, and Sophia are discussing the main reason people use credit. What do they agree upon?

• To buy things they can't afford with cash

• To save money

• To avoid debt

• To invest in stocks

What is a credit score?

• A number that indicates the likelihood of repaying debt

• The total amount of debt a person has

• The interest rate on a credit card

• The duration of a loan

Hannah, Elijah, and Avery are discussing credit scores. They mention various components, but one of them is incorrect. Which of the following is not a component of a credit score?

• Type of debt

• New debt

• Duration of debt

• Amount of savings

Harper, Lily, and Hannah are discussing the importance of checking their credit reports regularly. What is the main reason they should do this?

• To monitor their credit scores

• To spot signs of identity theft

• To apply for new credit cards

• To increase their credit limits

Priya, Samuel, and Ava are discussing their car loans. They realize that there are three main components of a car loan payment. Can you help them identify these components?

• Principal, interest, and term

• Credit score, collateral, and lien

• Equity, depreciation, and negative equity

• Installment credit, revolving credit, and predatory lending

Samuel, Ava, and David are discussing the fastest way to get out of debt. What do you think is the best option for them?

• Paying cash for everything

• Using credit cards responsibly

• Leasing a car

• Taking out a personal loan

Harper, Michael, and William are discussing ways to pay off their debts. They come across the debt snowball method. What is the purpose of this method?

• To pay off debt with the highest interest rate first

• To pay off debt with the lowest balance first

• To consolidate all debts into one loan

• To avoid taking on any debt

Ava, Benjamin, and Grace are discussing the disadvantages of leasing a car. What do they agree is the main disadvantage?

• Higher monthly payments

• Limited mileage allowance

• No option to buy the car

• Higher interest rates

Noah, Maya, and Abigail are discussing ways to avoid debt. Which method do they agree is the best?

• Using credit cards for all purchases

• Taking out student loans

• Borrowing money from friends and family

• Living within your means and saving money

Grace, Isla, and Ava are shopping together and discussing the purpose of a store credit card. What do you think is the main purpose of a store credit card?

• To provide discounts and rewards for loyal customers

• To increase your credit score

• To invest in the stock market

• To avoid paying with cash