CCDS Consumer Debt Products & Interest Calculations

Question 1

A credit card has a nominal annual interest rate of 24%. What is the approximate monthly periodic rate used to calculate finance charges?

Accepted Answer

2%

Answer

1%

Answer

3%

Answer

4%

Question 2

Which type of consumer debt is typically classified as 'unsecured'?

Accepted Answer

Credit card balance

Answer

Auto loan

Answer

Home equity loan

Answer

First mortgage

Question 3

The Annual Percentage Rate (APR) on a loan differs from the stated interest rate because APR:

Accepted Answer

Includes fees and costs of the loan

Answer

Excludes compounding effects

Answer

Only applies to fixed-rate loans

Answer

Is always lower than the stated rate

Question 4

A consumer borrows $5,000 at 10% simple interest for 2 years. How much total interest will be paid?

Accepted Answer

$1,000

Answer

$500

Answer

$1,050

Answer

$1,100

Question 5

Which repayment structure requires equal monthly payments covering both principal and interest, with interest portion decreasing over time?

Accepted Answer

Amortizing installment

Answer

Balloon payment

Answer

Interest-only

Answer

Revolving credit

Question 6

A payday loan charges $15 per $100 borrowed for a 14-day term. What is the approximate APR?

Accepted Answer

391%

Answer

15%

Answer

36%

Answer

130%

Question 7

Which feature distinguishes revolving credit from installment credit?

Accepted Answer

Revolving credit allows repeated borrowing up to a set limit

Answer

Revolving credit has a fixed repayment schedule

Answer

Installment credit has no set end date

Answer

Installment credit requires no collateral