Unit 4 Review

Emily is evaluating her options between a debit card, a prepaid debit card, and a credit card. Which of the following is accurate?

• All three cards function differently

• Debit cards are identical to prepaid debit cards

• Debit cards and credit cards serve the same purpose

• There is no difference

Which represents the interest rate on a payday loan?

• They are typically low

• They are typically average

• They are traditionally similar to a bank loan

• They are extremely high

What is a key difference between how credit cards and debit cards operate?

• Credit cards are linked directly to your bank account, while debit cards are not

• Debit cards offer rewards programs similar to credit cards

• Credit cards allow you to borrow money up to a certain limit, while debit cards use funds directly from your account

• Debit cards require a monthly payment, while credit cards do not

Which of the following is most likely to be a type of secured loan with a fixed interest rate?

• A personal loan

• A mortgage

• A payday loan

• A credit card

If I pay more than my monthly payment on my amortized loan, what happens?

• Larger payments will lead to a reduction in the interest rate charged by the lender

• Extra payments are applied to the principal, reducing the total debt faster

• Additional payments are used to cover interest, lowering the loan's total cost

• Amortized loans have higher interest rates than other loans, making them a priority for extra payments

When a loan is amortized, does the amount of money that goes towards principal increase, stay the same, or decrease over time?

• Constant, Increases, Decreases

• Increase

• Variable, Increases, Decreases

• Variable, Decreases, Increases

What is a key difference between fixed-rate and adjustable-rate mortgages?

• Fixed-rate mortgages have a constant interest rate and monthly payment throughout the loan term, while adjustable-rate mortgages may have changing interest rates and payments.

• Fixed-rate mortgages have an interest rate that changes annually, while adjustable-rate mortgages have a constant interest rate.

• Adjustable-rate mortgages have a fixed interest rate for the entire loan term, while fixed-rate mortgages have a variable interest rate.

• Both fixed-rate and adjustable-rate mortgages have interest rates that change based on market conditions.

Sheri borrowed $500 from a payday lender in June. By December, she had repaid a total of $1,250. What happened?

• Denise was charged a flat fee of $750 when she took out the loan, which she agreed to pay

• The interest rate on payday loans is very high, causing the amount owed to increase rapidly

• Denise made a mistake and accidentally paid back more than she owed

• She didn't pay it back quickly, which resulted in costly renewals and penalties

Jack is about to go car shopping and has a set amount of money put aside for a down payment. He wants the lowest possible monthly payment...what should he do?

• Put in $0 for your down payment, and choose a loan with a short term length
• Put in $2500 for your down payment, and choose a loan with a short term length
• Put in $3500 for your down payment, and choose a loan with a long term length
• Put all of the money down for the down payment and choose a loan with a long term length

A loan with a long term length will have __________ monthly payments, and you will pay __________ in total interest.

• higher, less
• higher, more
• lower, less
• lower, more