Unit 4.1 Quiz

Which word represents the total cost of the item you’re purchasing on credit minus any down payment you make upfront?

• Principal
• Term
• APR

What does the word term refer to when discussing a loan?

• The amount of money you owe.
• The time you have to pay the loan off.

What is the difference between a fixed and variable interest rate?

• Fixed interest rate is always better
• Variable interest rate is always better
• Fixed interest rate remains the same each month and variable interest rate changes month to month.

Each of the following represents an installment loan EXCEPT... (Which one is not an installment loan)

• Home mortgage
• Auto Loan
• Credit Card

Which of these actions would most likely decrease a person’s net worth for at least the next 6 months?

• Use a loan to buy a brand new car
• Work 10 hours of overtime each week and put all extra earnings into a savings account

Which of the following is most likely to represent a fixed rate, secured debt?

• A credit card
• An auto loan

Which of the following best describes an unsecured loan?

• A loan with a fixed interest rate

• A loan backed by collateral

• A loan not backed by collateral

What is the main purpose of a down payment when purchasing an item on credit?

• To increase the interest rate

• To reduce the total amount financed

• To extend the loan term

Which factor most directly affects the monthly payment amount on an installment loan?

• The color of the item purchased

• The loan term

• The store location

What is the main advantage of choosing a shorter loan term when financing a purchase?

• Longer time to repay

• Pay less total interest

• Lower monthly payments