3.4.

3
  Test (TST): Credit and Debt Test
Personal Financial Literacy Name:  
Date:  

Part I: Short-Answer Questions (40 points)

1. What is the difference between revolving credit and installment credit? Define each
term, and give two examples of each type of loan. Then explain which type of loan is
more practical for day-to-day purchases, and why. (8 points)

2. Explain the difference between a fixed interest rate and a variable interest rate.
Identify one advantage and one disadvantage of each type of interest rate. (8 points)

3.4.3 Test (TST): Credit and Debt 1/4

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3. What is an annual percentage rate (APR)? Describe one similarity and one
difference between the APR and the interest rate on a credit card or loan. Why would
the APR differ from a creditor's posted interest rate? In your response, also explain
how borrowers can use the APR to evaluate loan options, and describe why
borrowers should be wary of low introductory APRs. (8 points)

4. What should someone do if they have accumulated considerable debt? Describe at

least four ways in which a person can monitor and reduce their overall debt. (8
points)

5. What is bankruptcy? Define the term, and then explain why it should be considered
a last resort for borrowers. Then describe three negative impacts of declaring
bankruptcy. (8 points)

3.4.3 Test (TST): Credit and Debt 2/4

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Part II: Application and Critical Thinking (20 points)

6. Sean is ready to take out a loan to buy his first car. He is tempted to buy a car that
costs more than he can really afford. Based on what you have learned, what advice
would you give Sean? Your response should include the following information: Why
might it be better for Sean to buy a less expensive car? What risks are involved in
borrowing money that he cannot repay? Consider both the short- and the longer-term
impacts. (20 points)

3.4.3 Test (TST): Credit and Debt 3/4

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copying, reuse, or redistribution is prohibited.
Copyright © 2022 Apex Learning Inc. Use of this material is subject to Apex Learning's Terms of Use. Any unauthorized

copying, reuse, or redistribution is prohibited. Apex Learning ® and the Apex Learning Logo are registered trademarks of

Apex Learning Inc.

3.4.3 Test (TST): Credit and Debt 4/4

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copying, reuse, or redistribution is prohibited.