Title: QUIZ: Loans and Payday Loans: What’s the Cost? (It's Your Paycheck, Lesson 8) Module
Course: Kelly O's Course > Section: Loans and Payday Loans: What’s the Cost? (It's Your Paycheck, Lesson 8) Module

Q: Which of the terms below is the percentage cost of credit on an annual basis and the total cost of credit to the consumer?
- Interest rate
- Annual percentage rate (APR)
- Loan rate
- Delayed payment rate (DPR)
A: Annual percentage rate (APR)
If right: That is correct.
If wrong: That is incorrect. Annual percentage rate (APR) is the percentage cost of credit on an annual basis and the total cost of credit to the consumer.

Q: Which loan is likely to have the highest annual percentage rate (APR)? All of the loans are $500 and include a finance charge of $20.
- Term of 5 days
- Term of 10 days
- Term of 20 days
- Term of 30 days
A: Term of 5 days
If right: That is correct.
If wrong: That is incorrect. The loan with the five-day term is likely to have the highest annual percentage rate (APR).

Q: Emma borrowed $300 to repair her car. The finance (interest) charge on the loan was $20, and the term on the loan was 14 days. What was the APR for Emma’s loan?
- 150 percent
- 174 percent
- 210 percent
- 391 percent
A: 174 percent
If right: That is correct.
If wrong: That is incorrect. The APR for Emma’s loan was 174%.

Q: What is the primary purpose of interest in a loan transaction?
- To provide a discount to the borrower
- To compensate the lender for making the loan
- To increase the principal amount of the loan
- To serve as a form of incentive for the borrower
A: To compensate the lender for making the loan
If right: That is correct.
If wrong: That is incorrect. The primary purpose of interest in a loan transaction is to compensate the lender for making the loan.

Q: What is a defining characteristic of payday loans?
- They have a long repayment period.
- They are unsecured loans with short repayment periods.
- They require collateral to secure the loan.
- They are typically used for long-term investments.
A: They are unsecured loans with short repayment periods.
If right: That is correct.
If wrong: That is incorrect. The defining characteristic of payday loans is they are unsecured loans with short repayment periods.

Q: What happens if a payday loan borrower is unable to repay the loan within the term?
- The lender will extend the repayment period without any penalties.
- The borrower will receive a 30-day grace period before the lender collects the full amount.
- The lender will collect the collateral originally used to secure the payday loan.
- Fees and interest will be added to the loan total for each additional term it takes to repay the loan.
A: Fees and interest will be added to the loan total for each additional term it takes to repay the loan.
If right: That is correct.
If wrong: That is incorrect. If a borrower is unable to repay the payday loan within the term, fees and interest are added to the loan total for each additional term it takes to repay the loan.

Q: Which of the terms below is a sum of money provided temporarily on the condition that the amount borrowed be repaid, usually with interest?
- Loan
- Collateral
- Grant
- Deposit
A: Loan
If right: That is correct.
If wrong: That is incorrect. A loan is a sum of money provided temporarily on the condition that the amount borrowed be repaid, usually with interest.

Q: Which of the terms below is the percentage of the amount of a loan that is charged for a loan? This is also the percentage paid on a savings account.
- Interest rate
- Principal
- Dividend
- Collateral
A: Interest rate
If right: That is correct.
If wrong: That is incorrect. The interest rate is the percentage of the amount of a loan that is charged for the loan. It’s also the percentage paid on a savings account.