Cost of Installment Buying

What is installment buying a form of?

• Open end credit

• Closed end credit

• Revolving credit

• Secured credit

What does installment buying add to the cost of big purchases?

• Reduces the cost

• Adds a lot

• Has no effect

• Minimizes the cost

Fill in the blank: Typical items bought using closed end credit include vehicles, machinery, and _______.

• Buildings

• Furniture

• Groceries

• Clothing

What is the formula for Amount Financed (AF)?

• AF = Cash price + Down payment

• AF = Cash price - Down payment

• AF = Total of all monthly payments - Down payment

Fill in the blank: Deferred payment price (DPP) is the total of all monthly payments plus the ________.

• down payment.

• interest rate.

• service charge.

• processing fee.

What does Finance Charge (FC) represent?

• The total amount borrowed

• The interest charge

• The down payment

Fill in the blank: An Installment loan is a loan paid off in a series of equal periodic payments. Payments include ________ and principal.

• interest.

• taxes.

• fees.

• insurance.

What is Amortization?

• A) The process of borrowing money

• B) The process of paying back a loan by equal periodic payments

• C) The process of calculating interest.

What does APR stand for in the context of lending?

• APR stands for Annual Percentage Rate.

• APR stands for Annual Payment Rate.

• APR stands for Annual Penalty Rate.

• APR stands for Annual Premium Rate.

What is open-end credit?

• A) A type of credit that cannot be increased.

• B) Additional credit amounts can be added up to a set limit.

• C) A credit line that decreases over time.

• D) A fixed credit amount that cannot be changed.