What is the cost of credit?
Cost of Credit

Flashcard
•
Mathematics
•
8th Grade
•
Hard
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1.
FLASHCARD QUESTION
Front
Back
The cost of credit refers to the total amount of money that a borrower pays to a lender in exchange for borrowing money, including interest and any additional fees.
2.
FLASHCARD QUESTION
Front
Define interest rate.
Back
The interest rate is the percentage of the loan amount that a lender charges a borrower for the use of borrowed money, typically expressed on an annual basis.
3.
FLASHCARD QUESTION
Front
What is a loan term?
Back
A loan term is the duration over which a borrower agrees to repay a loan, which can range from a few months to several years.
4.
FLASHCARD QUESTION
Front
How do you calculate total repayment on a loan?
Back
Total repayment is calculated by multiplying the monthly payment amount by the total number of payments made over the loan term.
5.
FLASHCARD QUESTION
Front
What is the formula to calculate interest paid on a loan?
Back
Interest paid = Total repayment - Principal amount.
6.
FLASHCARD QUESTION
Front
What is the difference between fixed and variable interest rates?
Back
A fixed interest rate remains the same throughout the loan term, while a variable interest rate can change based on market conditions.
7.
FLASHCARD QUESTION
Front
How does a lower interest rate affect total repayment?
Back
A lower interest rate reduces the monthly payment amount and the total repayment amount over the life of the loan.
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