3.2 Loans

Front

What is the formula to calculate the time needed to save for a purchase?

Back

Time (months) = Total Cost / Monthly Savings

Front

Define APR in the context of loans.

Back

APR (Annual Percentage Rate) is the yearly interest rate charged on borrowed money, expressed as a percentage.

Front

What is the impact of a high APR on loan payments?

Back

A high APR increases the total interest paid over the life of the loan, resulting in higher monthly payments.

Front

How do you calculate monthly payments for a loan?

Back

Monthly Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^-Number of Payments)

Front

If Joe saves $185 per month, how long will it take him to save $2,340?

Back

It will take Joe 13 months to save for the keyboard.

Front

What does a credit limit refer to?

Back

A credit limit is the maximum amount of credit that a lender extends to a borrower.

Front

What is the difference between a loan with a 3.5-year term and a 3-year term?

Back

A loan with a shorter term typically has higher monthly payments but less total interest paid.

Front

How do you calculate interest on a credit card balance?

Back

Interest = Average Daily Balance * Daily Interest Rate * Number of Days in Billing Cycle

Front

What is the significance of the average daily balance in credit card interest calculation?

Back

The average daily balance is used to determine the interest charged on a credit card, reflecting the amount owed over time.

Front

What is the formula to find the interest charged on a loan?

Back

Interest = Principal Amount * Rate * Time (in years)