LOANS

Question 1

is a form of debt incurred by an individual or other entity, then the lender—usually a corporation, financial institution, or government—advances a sum of money to the borrower. in return, the borrower agrees to a
certain set of terms

Answer 1

LOAN

Question 2

a loan can be categorized as either a ___________ or a ________________

Answer 2

BUSINESS LOAN or a CONSUMER LOAN

Question 3

are money lent specifically for a business purpose. it may be used to start or expand a business

Answer 3

BUSINESS LOAN

Question 4

are money lent to an individual for personal or family purposes. these loans can be used to purchase items like cars or secure house and lots

Answer 4

CONSUMER LOAN

Question 5

is an asset used to secure a loan. it may be a real-estate or other investments as a guarantee for payment

Answer 5

COLLATERAL

Question 6

is the period to pay the entire borrowed amount

Answer 6

TERM OF THE LOAN

Question 7

the process or method of paying for a loan (principal and interest included). this is often done on an installment basis with equal amounts of payment at regular intervals.

Answer 7

AMORTIZATION

Question 8

a type of loan secured by a collateral that the borrower is obliged to pay at specified terms

Answer 8

MORTGAGE

Question 9

a mortgage on a movable property

Answer 9

CHATTEL MORTGAGE

Question 10

remaining amount of debt left unpaid at a specified period

Answer 10

OUTSTANDING BALANCE

Question 11

two formulae for mortgage amount

Answer 11

Cash value − down payment;

Cash value x Financed rate

Question 12

a method of computing for the outstanding balance

Answer 12

PROSPECTIVE METHOD

Question 13

method that pertains to getting the present value of all remaining payments

Answer 13

PROSPECTIVE METHOD

Question 14

used to denote the outstanding balance after k payments

Answer 14

Bk

Question 15

outstanding balance computes for the payments after _ within the term _.

Answer 15

k; n

Question 16

formula for finding the outstanding balance

Answer 16

Bk = R ( ( 1 - ( 1 + j ) ^ -( n - k ) ) / j )
where:
(n - k) is the remaining payments to be made
n - total number of payments
k - number of payments already made

Question 17

in computing the outstanding balance of the 51st payment (not after the 51st payment), k is equal to what

Answer 17

50

Question 18

how do you find the interest component of a regular payment after a particular payment

Answer 18

multiply the interest rate per period to the outstanding balance

Question 19

how do you find the principal component of a regular payment after a particular payment

Answer 19

subtract the interest component from the regular payment

Question 20

symbol for interest component and principal component

Answer 20

I sub (k+1);
PR sub (k+1)
where:
k is number of payments already paid

Question 21

if 20% is the down payment, the rest of 80% is called

Answer 21

FINANCED RATE