Answers2027 Ignite Financial Literacy-Personal Finance - EL3403Credit and Loans

Credit and Loans Answers

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21
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Which describes the difference between secured and unsecured credit?

A
Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.
B
Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.
C
Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.
D
Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.
22
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Read the scenario.Jay and Laura have been dreaming of purchasing their first home together. They've been diligently saving and have managed to accumulate a significant sum for a down payment.How does their decision to make a larger down payment benefit their financial situation as they purchase a home?

A
It increases the interest rate on the loan.
B
It decreases their credit score.
C
It increases the home’s value.
D
It decreases their monthly payment.
23

The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
a personal loan.
C
an auto loan.
D
a mortgage.
24

What best determines whether a borrower’s interest rate on an adjustable rate loan goes up or down?

A
a fixed interest rate
B
a bank's finances
C
a market's condition
D
a person's finances
25

[BLANK]

A
credit card
B
mortgage
C
tax
D
bond
26

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

A
$10.00
B
$21.00
C
$33.10
D
$46.41
27

For which buyer would a lender most likely approve a $200,000 mortgage?

A
a person with a credit score of 800 with a large amount of debt who has recently switched to a lower-paying job
B
a person with a credit score of 760 with a small amount of debt who has had steady employment for many years
C
a person with a credit score of 650 with a large amount of available credit who has a low-paying, but steady job
D
a person with a credit score of 600 with a small amount of available credit who has recently switched to a high-paying job
28

Which describes the difference between simple and compound interest?

A
Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans.
B
Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.
C
Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans.
D
Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.

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