Unit 7 Quiz 1

Which of the following is an example of a secured debt?

• A credit card

• A student loan

• An auto loan

• A personal loan from family

What is the main difference between an annual interest rate and an annual percentage rate (APR)?

• APR is the interest rate combined with guaranteed fees

• APR is almost always lower than interest rate

• Interest rate is for loans, while APR is for credit cards

• Interest rate is money you earn on investments, while APR is money you pay for debt

All of the following affect the monthly payment amount of a mortgage EXCEPT...

• Down payment

• Interest rate

• Term of the loan

• The bank that issues the mortgage

What is one way to guarantee you don’t pay interest on your credit card?

• Pay your entire balance in full every month

• Pay your minimum monthly payment on time

After much shopping, Kelli found a car she’d love to buy. When it comes time to talk about financing, the salesperson at the dealer says, “I can offer you 6% on $24,000 for 5 years.” What do each of those numbers mean?

• 6% is the term, $24,000 is the down payment, 5 years is the interest rate

• 6% is the term, $24,000 is the interest rate, 5 years is the principal

• 6% is the interest rate, $24,000 is term, 5 years is the principal

• 6% is the interest rate, $24,000 is the principal, 5 years is the term

Moto has a $7000 credit card balance, and he cannot afford to pay it all off at once. The larger his monthly payments...

• The longer it will take to pay it off and the smaller total interest he’ll pay

• The longer it will take to pay it off and the larger total interest he’ll pay

• The shorter it will take to pay it off and the smaller total interest he’ll pay

• The shorter it will take to pay it off and the larger total interest he’ll pay

May is taking out student loans to pay for college. Why might she take out private student loans in addition to federal student loans?

• She is ineligible for some federal student loans due to her parents’ low credit scores

• She wants her private student loan balance to be forgiven under the Public Service Loan Forgiveness program

• She needs more funding than is available through federal student loans

• She wants to take advantage of the lower interest rates offered by private student loans

What error did Missy make?

• The interest rate should be 0.325

• The monthly interest rate should not be added to 1 in the parentheses

• The exponent does not take into account the frequency of compounding

• The interest rate should not be divided by 2

Anna took out a $20,000 car loan at a 6.6% fixed annual interest rate, compounded monthly. If she pays the minimum of $350 each month, what is Anna's monthly interest rate?

(Hint: Divide the fixed annual interest rate by the number of months in the year)

• $14,444.53
• $14,324.18
• $13,344.03
• $14,754.00
• $14,507.36
• $14,260.08