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1. _____ is a good example of a closed-end credit. A credit card issued by a department store A credit card issued by VISA or MasterCard A mortgage loan Using a cashier's check to pay for a purchase Using overdraft protection at a bank
Question 2. When obtaining open-end credit, you may see this being offered as installment credit. a box of credit. convenience credit. revolving credit.
a single lump-sum credit.
Question 3. Which one of these agencies can provide a report about your past and present credit activity to a prospective creditor? The Federal Reserve Bank in your district The Audit Bureau of Circulation The Federal Trade Commission A debit bureau A credit bureau
Question 4. Dividing monthly debt payments (not including house payments) by net monthly income will allow you to calculate your _____. net-worth-to-debt ratio debt-payments-to-income ratio liability status credit capacity status income-to-liability ratio
Question 5. In determining your credit capacity, you first provide for basic necessities, such as furniture. home furnishings. mortgage or rent. automobiles.
Question 6. Personal bankruptcy can be reported to credit bureaus for _____ years. 5 7 10 15 25
Question 7. When a loan officer is examining your income and the amount of your existing debt payments in deciding whether to make a loan to you, which aspect of the five Cs of lending is the loan officer most likely looking at?
Question 8. When a lender examines your job situation and the security of your employment, it is considering which area of lending?
Question 9. All of the following reasons are reasonable situations when you would decide to use credit except
borrowing for a stay in a hospital because of appendicitis.
borrowing to pay for your expensive dinner and movie every week.
borrowing to buy a printer for your home office now because you know it will be twice as expensive in 2 years.
borrowing to purchase a car so that you can go to work full time.
using a credit card to purchase an airline ticket to visit a sick relative.
Question 10. If Jack uses a Visa card to purchase a new digital camera, he would be using what type of credit?
Installment sales credit
Installment cash credit
Single lump sum credit
Question 11. One of the following financing methods typically provides individuals with a float period. Which one of these methods has this as an option?
A loan from a relative
Lump sum loan
Home equity line of credit
Question 12. While collateralized loans may provide lower interest rates, these loans have a disadvantage because
the loan must be repaid in a short period of time.
you ruin your credit rating.
the loan is difficult to obtain.
commercial banks do not make such loans.
the assets used as collateral are tied up until the loan has been repaid.
Question 13. One source of the most expensive loans is through
Question 14. Which one of the following is a signal of a potential debt problem?
Paying the maximum balance due each month
Borrowing money to pay old debts
Using savings to pay for major purchases
Receiving notice of prompt payment from creditors
Occasionally working overtime and moonlighting
Question 15. If Tony Jones knows he can get a car loan for up to 5 years at a credit union but decides that he can easily repay the loan in 3 years, and therefore gets a 3-year loan, how is Tony reducing the lender's risk?
He is sharing the interest rate risk with his lender.
He is pledging valuable assets that can be seized if the loan is not repaid.
He is repaying the loan over a faster period of time.
He is taking a larger stake in the asset he is purchasing.
He is obtaining the loan from the credit union.
Question 16. Sarah Russell starts the month with a balance of $1,000 on her credit card. On the 10th day of the month, she purchases $200 in clothes with her credit card. On the 15th day of the month she makes a payment on her credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. Sarah's interest rate is 1.5% for the month. Sarah's bank calculates the finance charge on the credit card by using the average daily balance, excluding new purchases. What would Sarah's finance charges be for the month?
Question 17. If Jeff rushes to purchase a home by obtaining an interest-only loan, and the reason why he wants a home is because he wants to have a house just like the one that his parents had when he was a teenager, this is an example of which of the following?
Misunderstanding or lack of communication
The use of money to punish
Overindulgence of children
Keeping up with the Joneses
The expectation of instant comfort
Question 18. Over time, which method of payment is likely to be the least expensive?
Bank credit card
Check written on a home equity line of credit (HELOC)
Store credit card
A title loan
Question 19. In terms of borrowing expenses, which of the following options would be relatively the cheapest?
Question 20. If Marjorie Wilcox borrows $200 for 1 year with an APR of 12% and an annual service fee of $10, what is her total cost of credit?