Question

Kathy purchased a $2,000 digital tv from young's appliances. she will make 12 equal payments over the next year to pay for it. she is using: question 8 options:

a. closed-end credit.
b. open-end credit.
c. revolving check credit.
d. a line of credit.

Answer 1

Kathy is using closed-end credit by repaying a fixed amount borrowed for the purchase of a digital TV in 12 equal payments over one year. This type of credit is specifically suited for single-item purchases with set repayment terms.

Step-by-step explanation:

Kathy is using closed-end credit to purchase the $2,000 digital TV. This type of credit involves a fixed amount of money lent to a borrower for a specific purpose, which is then repaid in equal installments over a predetermined period. Since Kathy will make 12 equal payments over the next year, the characteristics match those of closed-end credit. Conversely, open-end credit, such as credit cards, allows continuous borrowing up to a limit, repayments are not fixed, and amounts borrowed can vary. Revolving check credit and lines of credit also offer flexible borrowing but do not fit the scenario of fixed installments for a single purchase.The financial discipline of budgeting would help individuals like Kathy manage their payments effectively. By allocating monthly income towards expenses, savings, and installments like the 12 payments for the TV, she can maintain financial stability while fulfilling her commitments. Indeed, using credit responsibly is a key aspect of sound personal finance management.