If Your Installment Loan Has a Variable Interest Rate

question 132

Multiple Choice

If your installment loan has a variable interest rate,

• A) the rate will remain the same over the life of the loan.
• B) the amount you borrowed will change with interest rates.
• C) you cannot accurately predict the total interest you will pay on the loan.
• D) you can calculate the total interest you will pay on the loan.
• E) your monthly loan payment will change every month.

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Definitions:

Allowance for Sales Discounts

An account used in bookkeeping to estimate the reduction in revenue due to sales discounts that customers are expected to take advantage of.

Accounts Receivable

Debts owed by customers to a business for items or services that have been furnished but not compensated.

Sales Discounts

A reduction in the price of goods sold, offered by the seller to the buyer, often to encourage prompt payment.

Periodic Inventory System

A method of inventory valuation for financial reporting purposes where a physical count of all inventory is performed at specific intervals to determine the level of inventory and the cost of goods sold.