Before Taking Out a Loan, You Should Ask Yourself Whether

question 129

Multiple Choice

Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by

• A) Adding up basic monthly expenses then adding this total to take-home pay.
• B) Asking what you plan to purchase with the loan
• C) Multiplying your take-home pay by 50% and subtracting your current loan payments.
• D) Adding up basic monthly expensesand subtracting this total from take-home pay, plus figuring out what to give up to make the monthly loan payment.
• E) None of the above

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Definitions:

Present Value

The monetary worth at present of a future sequence of payments or a single amount, calculated with a specific interest rate.

Preferred Stock

A type of stock that typically pays fixed dividends and has priority over common stock in the event of a liquidation.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to a share of the company’s assets and profits.

Dividends

Periodic payments made to shareholders, reflecting a portion of a company's profit.