Understanding Credit and Interest Calculation Quiz
Test your knowledge on loans, APR, credit scores, and more. Understand the fundamentals of credit and interest calculation.
#1
1. What is the principal amount in a loan?
The total amount paid over the loan term
The initial amount borrowed
The interest accrued on the loan
The monthly payment amount
#2
2. How is interest typically calculated on a loan?
Simple interest
Compound interest
Both a and b
None of the above
#3
3. What is the APR (Annual Percentage Rate) on a credit card?
The interest rate charged on the outstanding balance
The total cost of borrowing, including fees and interest
The minimum payment required each month
The credit limit on the card
#4
6. What is the grace period on a credit card?
The time during which no interest is charged on new purchases
The time allowed to repay the entire credit card balance without incurring interest
The period when a credit card is inactive
The duration before receiving a credit card statement
#5
7. How does a higher credit score generally impact loan interest rates?
Higher credit score leads to higher interest rates
Higher credit score leads to lower interest rates
Credit score has no impact on interest rates
Higher credit score only impacts credit card interest rates
#6
11. What is the Debt-to-Income Ratio (DTI) used for in financial assessments?
To calculate total income
To measure a person's ability to manage monthly debt payments relative to their income
To determine credit card interest rates
To assess the credit limit on a card
#7
14. In a variable-rate mortgage, what changes over time?
The loan amount
The interest rate
The loan term
The monthly payment amount
#8
4. How does making only the minimum payment affect credit card debt?
It accelerates debt payoff
It reduces interest charges
It extends the time to pay off and increases overall interest paid
It has no impact on debt repayment
#9
5. What is the difference between fixed and variable interest rates?
Fixed rates change over time, while variable rates remain constant
Fixed rates remain constant, while variable rates can change
Both fixed and variable rates remain constant
Both fixed and variable rates change over time
#10
8. What is the purpose of a cosigner on a loan?
To provide collateral for the loan
To guarantee repayment if the borrower defaults
To co-own the loan amount
To negotiate lower interest rates
#11
9. What is the difference between simple interest and compound interest?
Simple interest is charged on the principal only, while compound interest is charged on both the principal and accumulated interest
Simple interest is charged on both the principal and accumulated interest, while compound interest is charged on the principal only
Simple interest and compound interest are the same
Simple interest is only applicable to credit cards
#12
10. How does loan term (duration) affect the total interest paid?
Shorter loan terms result in higher total interest paid
Longer loan terms result in higher total interest paid
Loan term has no impact on total interest paid
Loan term only affects principal repayment
#13
12. How does a prepayment penalty affect the cost of repaying a loan?
It reduces the overall cost of the loan
It increases the cost of repaying the loan if paid off early
It has no impact on loan repayment
It only applies to fixed-rate loans
Sign In to view more questions.
Quiz Questions with Answers
Forget wasting time on incorrect answers. We deliver the straight-up correct options, along with clear explanations that solidify your understanding.
Popular Quizzes in Finance
Report