Question 1

In businesses today, the most commonly used method for determining a finance charge for a billing cycle is to find the highest daily balance within the last six months and multiply that by the periodic rate.​

Accepted Answer

The most commonly used methods for determining a finance charge include the average daily balance method, the adjusted balance method, and the previous balance method, rather than using the highest daily balance within the last six months.

Question 2

​A loan made for a specified number of equal monthly payments is called an installment loan. It is typically used for making purchases like cars, boats, furniture, or services such as vacations or home improvements.

Accepted Answer

An installment loan is indeed a type of loan that is repaid over time with a set number of scheduled payments; typically at least two payments are made towards the loan. The term of the loan may be as little as a few months and as long as 30 years. This type of loan is commonly used for purchasing high-value items like cars, boats, and furniture, as well as paying for services such as vacations or home improvements.

Question 3

​The pre-approved amount of an open-end credit based on the borrow's ability to pay is known as the line-of-credit.

Accepted Answer

A line of credit is indeed a pre-approved amount of money that a borrower can draw on as needed, up to a maximum limit, based on their creditworthiness and ability to repay.

Question 4

A finance charge rebate is a fee the lender charges a customer for paying off a loan early.​

Accepted Answer

A finance charge rebate is actually a refund to the borrower for paying off a loan early, not a fee charged by the lender.

Question 5

To determine a new credit card balance, use the following formula:
​
New Balance = Previous Balance + Finance Charge + Purchases and Cash Advances - Payments and Credits​

Accepted Answer

This formula accurately represents how to calculate a new credit card balance by taking into account the previous balance, adding any finance charges along with purchases and cash advances, and then subtracting any payments and credits made.

Question 6

The lending rate at which the largest and most credit-worthy corporations borrow from banks is called the U.S. Prime Rate.​

Accepted Answer

The U.S. Prime Rate is the interest rate that banks charge their most credit-worthy customers, typically large corporations.

Question 7

To calculate the average daily balance, use the following formula:
? $$\text { Average Daily Balance } = \frac { \text { sum of the daily balances } } { \text { days in billing cycle } }$$ ?

Accepted Answer

The formula for calculating the average daily balance is indeed to divide the sum of the daily balances by the number of days in the billing cycle. This method is commonly used by credit card companies to calculate interest charges.

Question 8

The finance charge of a credit card is calculated by multiplying the periodic rate by the prior month's balance.​

Accepted Answer

The finance charge on a credit card is typically calculated by applying the periodic interest rate (which is the annual interest rate divided by the number of billing cycles in a year) to the account's balance from the previous billing cycle. This method is one of the common ways credit card issuers calculate the interest charges that are added to the cardholder's account.

Quiz 13: Consumer and Business Credit

In businesses today, the most commonly used method for determining a finance charge for a billing cycle is to find the highest daily balance within the last six months and multiply that by the periodic rate.

A loan made for a specified number of equal monthly payments is called an installment loan. It is typically used for making purchases like cars, boats, furniture, or services such as vacations or home improvements.

The pre-approved amount of an open-end credit based on the borrow's ability to pay is known as the line-of-credit.

A finance charge rebate is a fee the lender charges a customer for paying off a loan early.

To determine a new credit card balance, use the following formula: New Balance = Previous Balance + Finance Charge + Purchases and Cash Advances - Payments and Credits

The lending rate at which the largest and most credit-worthy corporations borrow from banks is called the U.S. Prime Rate.

To calculate the average daily balance, use the following formula: ? $\text { Average Daily Balance } = \frac { \text { sum of the daily balances } } { \text { days in billing cycle } }$ ?

The finance charge of a credit card is calculated by multiplying the periodic rate by the prior month's balance.