Understanding Financing and Credit Concepts

This video tutorial covers installment buying, including definitions and examples. It explains how to calculate down payments, finance charges, and total installment prices. Two examples are provided: a furniture purchase and an iMac purchase, each illustrating different financing scenarios. The video also discusses credit card finance charges, showing how to calculate the finance charge and new balance using the unpaid balance method.

What is installment buying?

• Making periodic partial payments for an item.

• Paying for an item in full at the time of purchase.

• Borrowing money from a bank to buy an item.

• Leasing an item for a short period.

What is a fixed installment loan?

• A loan with no interest.

• A loan with equal payments.

• A loan with a balloon payment at the end.

• A loan with variable payments.

What is a down payment?

• The monthly payment for a loan.

• The initial payment made when purchasing an item.

• The interest paid on a loan.

• The total cost of an item.

How is the amount financed calculated?

• Total installment price minus finance charge.

• Total installment price plus down payment.

• Price of the item minus down payment.

• Price of the item plus down payment.

What does the total installment price include?

• Only the price of the item.

• The down payment only.

• Only the finance charge.

• The sum of all payments and the down payment.

In the furniture example, what was the down payment percentage?

• 25%

• 20%

• 15%

• 10%

What was the interest rate for the furniture purchase?

• 6%

• 7%

• 8%

• 9%

How long was the furniture financed for?

• 4 years

• 1 year

• 2 years

• 3 years

In the iMac example, what was the down payment for the first financing option?

• $100

• $200

• $300

• $400

What was the interest rate for the first iMac financing option?

• 13%

• 12%

• 11%

• 10%