Answers2027 Ignite Financial Literacy-Personal Finance - EL3403The Cost of Credit

The Cost of Credit Answers

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1
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Aria has a credit card that gives a 5% discount on every purchase and free shipping when used online. The annual percentage rate on the credit card is 18%. Aria wants to buy a doghouse that costs $580. Which statement about the cost of the doghouse is true?

A
If Aria uses the credit card and pays the full balance during the billing cycle, she will spend $2.42 less than paying cash for the doghouse.
B
If Aria uses the credit card and pays the full balance during the billing cycle, she will spend $8.70 less than paying cash for the doghouse.
C
If Aria uses the credit card and pays the full balance during the billing cycle, she will spend $29.00 less than paying cash for the doghouse.
D
If Aria uses the credit card and pays the full balance during the billing cycle, she will spend $104.04 less than paying cash for the doghouse.
2
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Which is a desirable characteristic to look for when choosing a credit card?

A
no grace period
B
low down payment
C
no annual fee
D
high interest rate
3

Mo has a credit card that gives a 3% discount on every purchase. The annual percentage rate on the card is 12%. He is purchasing an electronic reader for $140. Check all that apply.

A
If Mo uses the credit card and pays the full balance during the billing cycle, the cost of the purchase will be $140.
B
If Mo pays cash, the cost of the purchase will be $140.
C
If Mo uses the credit card and pays off the balance at $30 a month for 7 months with no late fees, the cost of the purchase will be $143.34.
D
If Mo pays cash, the cost of the purchase will be $135.80.
E
If Mo uses the credit card and pays off the balance at $20 a month for 7 months with no late fees, the cost of the purchase will be $139.89.
F
If Mo uses the credit card and pays the full balance during the billing cycle, the cost of the purchase will be $135.80.
4

The table shows a schedule of Jorge’s payment plan for a car. Jorge’s Payment PlanYearBalanceMonthly PaymentEnd of YearBalance1$15,469.80$257.83 2 $257.83 3 $257.83 4 $257.83 5 $257.83 6 $257.83 How many years will it take Jorge to pay off the loan?

3
3 years
4
4 years
5
5 years
6
6 years
5

Vera has a June credit card balance of $476.09. Her payment due date is June 27th, with a grace period of 5 days. If her payment is late, the credit card company charges a $30 late fee. Vera wants to pay the full amount to have a zero balance. How much should she pay if her online payment is processed on July 6th?$

Answer:

$506.09

6

Caitlyn has a credit card with a spending limit of $1500 and an APR (annual percentage rate) of 18%. During the first month, Caitlyn charged $375 and paid $250 of that in her billing cycle. Which expression will find the amount of interest Caitlyn will be charged after the first month?

Question illustration
A
Option
Option A
B
Option
Option B
C
Option
Option C
D
Option
Option D
7

What is easy-access credit?

A
credit that is to be repaid in full by a specific date
B
a loan given for a short period of time that is not dependent on credit history
C
the amount of money borrowed excluding accrued interest
D
an amount of time during which a loan can be repaid without interest
8

The table shows a schedule of Inga’s payment plan for a car. Inga’s Payment Plan for the First 3 YearsYearBalanceMonthly PaymentEnd of YearBalance1$19,691.28$273.49$16,409.402$16,409.40$273.49$13,127.523$13,127.52$273.49$9,845.64 How many more years will it take Inga to pay off the loan?

2
2 years.
3
3 years
4
4 years
6
6 years
9

Maura had to get a $350 emergency loan at a very high interest rate to pay for dental work. The lender did not need her credit history. If she does not pay back the loan within three weeks, she will have to pay an extra $50. Raina says the loan is an example of easy-access credit while Maura says it is an example of open-end credit. Which statement about the loan is correct?

R
Raina is correct because the loan is a line of credit.
M
Maura is correct because the loan has an interest rate.
R
Raina is correct because the loan has a large fee if it is not repaid on time.
M
Maura is correct because the loan does not have an annual fee.
10

Sienna has a car loan with an annual interest rate of 4.8%. She will make the same monthly payment for 48 months, after which the loan will be paid back. Diego says that Sienna’s loan is an example of closed-end credit while Sienna says it is an example of open-end credit. Which statement about the loan is true?

D
Diego is correct because the loan has to be paid in full by a specific date.
S
Sienna is correct because she had to pledge collateral to get the loan.
S
Sienna is correct because the amount can be borrowed again after she repays the loan.
D
Diego is correct because the loan is a line of credit.
11

Kanya has a credit card that gives a 6% discount on every purchase and free shipping when used online. The annual percentage rate on the credit card is 12%. Kanya wants to buy a laptop that costs $420. Which statement about the cost of the laptop is true?

I
If Kanya uses the credit card and pays the full balance during the billing cycle, she will spend $25.20 more than paying cash for the laptop.
I
If Kanya uses the credit card and pays the full balance during the billing cycle, she will spend $50.40 more than paying cash for the laptop.
I
If Kanya uses the credit card and pays the full balance during the billing cycle, she will spend $50.40 less than paying cash for the laptop.
I
If Kanya uses the credit card and pays the full balance during the billing cycle, she will spend $25.20 less than paying cash for the laptop.
12

The table shows a schedule of Mr. Kirov’s plan for paying off his credit card balance.Mr. Kirov’s Payment Plan BalancePaymentNew Balance RateInterest$800.00$100$700.000.012$8.40$708.40$100$608.400.012$7.30$615.70$100$515.700.012$6.19If Mr. Kirov continues to make monthly payments of $100 and does not make any new purchases, how many more payments will he need to make before the balance is 0?

A
4 payments
B
5 payments
C
6 payments
D
7 payments
13

Open-end credit is

a
a loan given for a short period of time that is not dependent on credit history.
p
pledged to a company as security for a loan repayment.
a
an amount of time during which a loan can be repaid without interest.
a
an agreement with an institution on a certain amount that can be repeatedly borrowed.
14

The table shows a schedule of Inga’s payment plan for a car. Inga’s Payment Plan for the First 3 YearsYearBalanceMonthly PaymentEnd of YearBalance1$19,691.28$273.49$16,409.402$16,409.40$273.49$13,127.523$13,127.52$273.49$9,845.64 How many more years will it take Inga to pay off the loan?

A
2 years.
B
3 years
C
4 years
D
6 years
15

Which is an example of easy-access credit?

A
$3000 monthly line of credit
B
credit card with a $4,000 limit
C
one-week payday loan for $350
D
$200,000 loan for a home
16

Tran has a credit card with a spending limit of $2000 and an APR (annual percentage rate) of 12%. During the first month, Tran charged $450 and paid $150 of that in his billing cycle. Which expression will find the amount of interest Tran will be charged after the first month?

A
(0.01) (300 dollars)
Option A
B
(0.01) (450 dollars)
Option B
C
(0.12) (300 dollars)
Option C
D
(0.12) (450 dollars)
Option D
17

Which is an example of easy-access credit?

A
$3000 monthly line of credit
B
credit card with a $4,000 limit
C
one-week payday loan for $350
D
$200,000 loan for a home
18

The table shows a schedule of Evita’s payment plan for a used car. Evita’s Payment Plan for the First Three YearsYearBalanceMonthly PaymentEnd of YearBalance1 $356.82 2 $356.82 3 $356.82$8,563.39Evita paid $2,408.91 in interest. What was the selling price of the car?

$
$12,845.52
$
$17,127.07
$
$19,000.00
$
$21,408.91
19

The table shows a schedule of Jorge’s payment plan for a car. Jorge’s Payment PlanYearBalanceMonthly PaymentEnd of YearBalance1$15,469.80$257.83 2 $257.83 3 $257.83 4 $257.83 5 $257.83 6 $257.83 How many years will it take Jorge to pay off the loan?

A
3 years
B
4 years
C
5 years
D
6 years
20

Sienna has a car loan with an annual interest rate of 4.8%. She will make the same monthly payment for 48 months, after which the loan will be paid back. Diego says that Sienna’s loan is an example of closed-end credit while Sienna says it is an example of open-end credit. Which statement about the loan is true?

A
Diego is correct because the loan has to be paid in full by a specific date.
B
Sienna is correct because she had to pledge collateral to get the loan.
C
Sienna is correct because the amount can be borrowed again after she repays the loan.
D
Diego is correct because the loan is a line of credit.

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