Loan Types: Pure Discount, Interest-Only & Amortization


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question 1 of 3

An amortizing loan entails payments with _____ that ensure the loan will be completely paid off at the end of the term.

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1. Which of the following statements about interest-only loans is TRUE?

2. A pure discount loan occurs when the loan _____.

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About This Quiz & Worksheet

This combo tests you on what loans are used for and the different loans that are used to fit different needs people have. The quiz will cover material such as information about an interest-only loan and pure discount loan.

Quiz & Worksheet Goals

This quiz/worksheet combo can help assess your knowledge of:

  • Information about an interest-only loan
  • The risks behind using an interest-only loan
  • Material about a pure discount loan
  • An example of a pure discount loan
  • A type of mortgage that includes interest and principle in the loan

Skills Practiced

  • Critical thinking - apply relevant concepts to examine information about an interest-only loan in a different light
  • Knowledge application - use your knowledge to answer a question about the risks of using an interest-only loan
  • Information recall - access the knowledge you've gained regarding a mortgage that calculates interest and principal into the loan

Additional Learning

To review more in-depth information on loans, check out the lesson titled Loan Types: Pure Discount, Interest-Only & Amortization. Objectives that this lesson will help you with include:

  • Recall the reasons why people would want to take out loans
  • Review information about a pure discount loan and the advantages and consequences of it
  • Learn about the appeal of an interest-only loan
  • Examine a type of loan that allows the borrower to pay off the full amount at the end of the term