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1. The following are methods used to obtain per...




1. The following are methods used to obtain personal information for identity theft except: a. lost or stolen wallet/credit card b. family, friends, acquaintances c. corrupt employees d. stolen mail e. all the above are methods used 2. The 5 Cs of Credit include all of the following except a. cash. b. capital . c. character. d. collateral. e. capacity. 3. All of the following are useful ways to build a strong credit rating except a. Open checking and savings accounts. b. Open and use a charge account. c. Apply for a long-term loan and occasionally be late with a payment. d. Make payments on time. e. Talk with the lender if you foresee difficulty in making a payment. 4. In order to establish her own credit history a woman should a. use her legal name. b. use her husband's name. c. file a credit report with her husband. d. use a social title, such as "Mrs. Jennifer Winson". e. none of these 5. The General Motors card and Citibank's Drivers Edge card are examples of ____ cards. a. debit b. rebate c. prestige d. travel and entertainment e. retail 6. If the information on your credit report is in dispute, you are entitled to a. correct it. b. sue. c. erase it. d. supply your own explanation about the dispute. e. withdraw from the credit bureau. 7. Most negative credit information remains on your credit file for ____ years. a. 10 b. 8 c. 7 d. 5 e. 4 8. A monthly credit card statement need not include information about the a. size of the payment. b. payment due date. c. type of the goods purchased. d. annual percentage rate. e. finance charge if any. 9. Chapter 7 bankruptcy will a. eliminate all financial obligations. b. result in the loss of all one's assets. c. stay on one's credit record up to 10 years. d. a and c e. a, b, and c 10. Credit bureaus a. will send you a free copy of your credit report whenever you ask. b. may charge up to $20 for a copy of your credit report. c. are required to correct errors only when a creditor asks them to. d. All of these e. None of these 11. Connie lost her wallet that contained a bank debit card. What is the maximum amount Connie would be responsible for if someone uses her debit card before she can report it missing? a. $ 50. b. $ 100. c. $ 500. d. $1,000. e. The entire balance. 12. Appropriate reasons to use credit include for a. convenience. b. durable expenses. c. investments. d. emergencies. e. all of the above 13. It is not a good idea to use credit to a. buy a home. b. live beyond one's means. c. spread payments within a budget. d. purchase expensive items. e. replace a check for small items. 14. As a percent of take-home pay, monthly consumer credit payments should not exceed a. 25%. b. 20%. c. 15%. d. 10%. e. 5%. 15. Open account credit is characterized by a. no credit limit. b. a monthly credit statement. c. annual billing. d. minimum balance requirements. e. none of the above. 16. The most prestigious of credit cards is currently the a. VISA Classic. b. Gold MasterCard. c. Platinum American Express. d. Green American Express. e. Amex Blue. 17. Interest will almost always begin to accrue immediately when you use a bank credit card to a. make purchases. b. send payments. c. compute finance charges. d. get cash advances. e. all of these. 18. Rebate card work best for those who use the rebates and a. charge large amounts on the card. b. pay the total card balance off monthly. c. carry high monthly balances. d. travel internationally e. a and b 19. Interest rates on ____ are typically lower than on any other form of consumer credit. a. travel and entertainment cards b. debit cards c. credit cards d. home equity loans e. unsecured personal credit 20. The ____ is really a second mortgage on your home. a. affinity card b. unsecured personal credit line c. home equity line of credit d. preferred Visa card e. platinum American Express card 21. Sheldon has a home valued at $108,000 and an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of market value, how much could Sheldon borrow using a home equity loan? a. $86,400 b. $80,000 c. $38,000 d. $30,400 e. $16,400 22. A problem with home equity loans is the a. high rate of interest on these loans. b. difficulty in qualifying for these loans. c. short-term nature of these loans. d. temptation to spread payments over a long term. e. tax disadvantages of these loans. 23. The quality of your credit rating is maintained by a. only using cash to make purchases. b. making credit payments early. c. seldom questioning billing errors. d. using multiple credit cards. e. meeting credit obligations as contracts require. 24. Your credit card has been stolen and used by someone else. The maximum amount you could be responsible for paying is a. $ 50. b. $ 100. c. $ 500. d. $1,000. e. You would have to pay the entire balance. 25. A type of bankruptcy that allows one to wipe out his unsecured debt and restructure his secured debt is called a. the wage earner plan. b. Chapter 11 bankruptcy. c. Chapter 20 bankruptcy. d. Chapter 7 bankruptcy. e. Chapter 13 bankruptcy. 1. A legal claim that allows credits to liquidate loan collateral is a a. loan. b. note. c. security claim. d. lien. e. none of these 2. Home equity loans are similar to other installment loans except a. interest rates are generally higher. b. the interest paid is generally tax deductible. c. no home equity is required. d. they are typically unsecured debts. e. a and c 3. A note is the a. agreement allowing the installment lender to control the item being purchased. b. promise to repay. c. sales contract. d. purchase agreement. e. insurance agreement. 4. The ____ legally binds the borrower and lender to all items and conditions of an installment contract. a. note b. contract c. security agreement d. sales contract e. bond 5. Your debt safety ratio a. does not include your home mortgage payment. b. is acceptable if it stays below 30%. c. need not be calculated for consumer loans. d. is calculated only for credit card debt. e. is a percentage of your gross income. 6. Besides the finance charge, you should also consider ____ when you shop for a consumer loan. a. loan maturity b. total cost of the loan c. collateral d. repayment penalties e. all of the above 7. Sales finance companies a. lend money to retailers. b. buy installment loans from retailers. c. sell installment loans to retailers. d. lend money to consumers. e. sell installment loans to banks. 8. Credit unions lend money to qualified people who are a. employees. b. members. c. previous borrowers. d. policyholders. e. stockholders. 9. The majority of loans made by savings and loan associations are ____ loans. a. home improvement b. auto c. mortgage d. education e. consolidation 10. Commercial banks generally charge lower interest rates than other lending institutions because a. they make shorter term loans. b. they usually take only the best credit risks. c. depositors require lower rates. d. they get their funds in the open credit market. e. they make secured loans only. 11. To qualify for a Stafford loan, you must a. demonstrate financial need. b. have a good credit rating. c. make satisfactory academic progress. d. all of the above e. a and c only 12. Regarding student loans, which of the following is not true? a. They are available for both undergraduate and graduate students. b. Applications can be filled out on the Internet. c. There is no limit on how much can be borrowed. d. There is no limit on the number of loans one can have. e. Interest may be tax deductible. 13. Which of the following is accurate concerning 529 college savings plans? a. Contributions are tax deductible for both state and federal income taxes. b. Earnings are tax-free when used for qualifying educational expenses. c. They have no impact on qualifying for financial aid. d. There is no limit on how much can be contributed. e. All of the above. 14. A characteristic of consumer loans is that they a. include a negotiated contract. b. are arrived at through a formal process. c. include a repayment schedule. d. are used to purchase big-ticket durable goods and other items. e. are all of these. 15. A consumer loan probably would not be used to a. purchase an auto. b. pay for college tuition. c. consolidate several loans into one. d. finance a special vacation. e. buy back-to-school clothes. 16. The most popular use of consumer loans is to a. purchase a car. b. finance a college education. c. finance a vacation. d. buy a house. e. buy furniture. 17. The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12% is a. 10%. b. 12%. c. 15%. d. 18%. e. 24%. 18. Purchasing credit life or disability insurance protection is usually a. required in order to make the loan. b. non-negotiable. c. at the lender's option. d. very costly. e. a good idea for the borrower. 19. When credit life or disability insurance protection is required as a condition of a loan, the cost a. must be added to the finance charge. b. must be included in the APR calculation. c. is generally very reasonable. d. a and b e. a, b, and c 20. Installment loans using the simple interest method a. have the highest finance charges of any method. b. have interest charged only on the monthly loan balance. c. do not have balloon payments. d. have a lower APR than the stated interest rate. e. have a higher APR than the stated interest rate. 21. You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the a. add-on method. b. double declining balance method. c. discount method. d. simple interest method. e. past-due balance method. 22. Sometimes it may be better to use savings rather than borrow to make a purchase. This would be recommended when a. the borrower has adequate savings. b. interest rates are rising. c. interest rates are falling. d. the cost of borrowing is greater than the interest earned on the savings. e. interest earned on savings is greater than the interest paid on the loan. 23. Long-term financial goals often depend on borrowing funds. The type of loan that does not fulfill the long-term goal achievement is ____ loans. a. consumer b. installment c. automobile d. mortgage e. single payment 24. Consumers whose debt burden has become very heavy might apply for a(n) a. personal loan. b. single payment loan. c. buy-down loan. d. consolidation loan. e. interim financing. 25. To qualify for a Perkins loan, you must a. demonstrate financial need. b. visit the financial institution. c. apply through your parents. d. all of the above e. a and c only 1. When a primary beneficiary dies before the insured, proceeds are payable to a. the state b. the probate court c. the insured's estate d. the contingent beneficiary or beneficiaries e. the insurance company keeps the proceeds 2. The basic purpose of insurance is to a. protect your health. b. protect you from losses. c. supplement your income. d. shield you from bad decisions. e. none of these 3. Insurance is a tool that can lessen ____ risk. a. social b. mental c. economic d. accident e. exposure 4. Which of the following companies does NOT rate the financial strength of life insurance companies? a. A.M. Best b. Moody's c. Duff & Phelps d. Weiss e. Welch's 5. The most valuable single technique in personal risk management to assist an individual in determining how much life insurance is needed is: a. Computing the Human Life Value. b. Using the probability of death each year, prevailing interest rates and assumed inflation rates to find the discounted present value of a future income stream. c. Assessing the family's total economic needs and subtracting financial resources available to meet those needs. d. Estimating the sum of money which, when paid in installments, will produce the same income as the person would have earned, after deducting assumed amounts for taxes and personal maintenance expenses. e. Using a multiple of earnings adjusted for occupation. 6. Underwriting helps protect life insurance companies from which of the following: a. major downturns in the economy b. short-term shocks in the investment markets c. adverse selection d. having too many healthy people buy life insurance e. shifts in the macro-social structure of the population 7. Life insurance policies with small face amounts where the premium may be collected weekly by agents is a. credit life insurance. b. mortgage life insurance. c. industrial life insurance. d. special purpose insurance. e. group life insurance. 8. A grace period permits the policy holder to retain insurance even though the premium has not been paid for a. a year. b. 6 months. c. 3 months. d. 2 months. e. 30 days 9. The beneficiary of a person who takes his own life would receive a. full insurance proceeds regardless of the timing of the suicide. b. full face value if the policy had been in effect for at least 6 months. c. full face value if the policy had been in effect for at least 1 year. d. full face value if the policy had been in effect for at least 2 years. e. nothing regardless of the timing. 10. Which of the following policy features allow the insured to increase coverage periodically without showing proof of insurability? a. multiple indemnity clause b. guaranteed purchase options c. disability clause d. paid-up insurance option e. extended-term option 11. For the insured who needs more life insurance, the best option for receiving policy dividends is to a. receive them as cash payments. b. leave the dividends with the insurance company to earn interest. c. buy additional paid-up coverage. d. apply them toward the next premium payment. e. take living benefits. 12. A life insurance contract contains clauses for a. settlement options. b. policy reinstatement. c. change of policy. d. all of the above. e. none of the above. 13. The purchase of insurance is a common form of which risk management technique: a. risk retention b. risk transfer c. risk assumption d. risk avoidance e. loss control 14. Underwriting is best described as: a. Activities related to selecting acceptable risks so that general insurer objectives are met. b. Actuarial science c. Production-related activities performed primarily by agents in the field d. Process of developing pricing structures for insurance, often performed by an actuary e. A function most often performed by adjusters. 15. Phil, who has enjoyed perfect health throughout his life, has determined that he needs a $1,000,000 30-year level term life insurance policy and is trying to choose the insurance company from which to purchase the policy. He predicts that his family will need the coverage for about 30 years. What should be the most important factor is Phil's decision of which insurance company to use? a. price b. cash value build up c. underwriting service d. claim service e. financial strength 16. Which of the following types of policies is most likely to allow you to switch investments? a. limited pay life b. whole life c. variable life d. term life e. adjustable whole life 17. Using the ____ approach is the most accurate method to determine life insurance needs. a. human life value b. multiple earnings c. risk assessment d. economic identification e. Needs 18. Joe died at age 45 leaving a wife (age 36) and two sons (ages 10 and 12). His wife, Maria, is not gainfully employed. Which of the following is true regarding their Social Security benefits assuming Joe was covered by Social Security? a. The sons will receive Social Security benefits until they are age 18. b. Maria can receive benefits for 6 more years. c. Maria can receive benefits when she is 60. d. a and b e. a, b, and c 19. The settlement option chosen by most beneficiaries is a. lump sum. b. interest only. c. fixed amount. d. fixed time. e. life income. 20. ____ is a common provision in many term policies. a. A reward clause b. A renewable clause c. Cash value d. A limited clause e. An arbitration clause 21. If life insurance is convertible, the policy can be a. transferred to the life of another person. b. exchanged for cash. c. changed to health or disability protection d. changed to another type of life insurance. e. revised as needed. 22. Decreasing term insurance usually has a decreasing face value and a. a decreasing premium. b. a level premium. c. an increasing premium. d. a fluctuating premium. e. none of the above. 23. The least expensive form of whole life insurance protection is a. term. b. straight life. c. limited payment. d. universal. e. none of the above. 24. Which of the following is not characteristic of universal life insurance? a. flexible premiums b. choice of how the accumulation account is invested c. option A provides a level death benefit d. option B provides a stated amount of insurance plus the accumulated cash value e. the death protection and the savings portion are identified separately 25. The insurance portion of a universal life policy is most analogous to a. mortgage insurance. b. group insurance. c. whole life insurance. d. term insurance. e. variable insurance. 1. Pete and Pam want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires total installment loan payments not exceed 32% of gross monthly income. Based on Pete and Pam's financial data below, what is the maximum monthly mortgage payment for which they can qualify? Monthly Gross Income $5,000 Car payment 400 Student loan payment 300 Current rent payment 1,000 a. $1,700 b. $1,600 c. $ 900 d. $ 600 e. $ 500 2. The type of mortgage that will most likely need to be refinanced is the ____ mortgage. a. fixed-rate b. adjustable-rate c. balloon-payment d. graduated-payment e. growing-equity 3. Variable auto ownership costs are most dependent on a. driver behavior. b. mileage driven. c. city lived in. d. down payment. e. hours driven. 4. The first step in the auto-buying process should be a. test drive several cars. b. begin negotiations. c. consider alternative buying strategies. d. decide whether to trade in your used car or to sell if yourself. e. analyze how much car you can afford. 5. Henry has $2,500 for a down payment and thinks he can afford monthly payments of $400. If he can finance a vehicle with an 8%, 3-year loan, what is the maximum amount Henry can spend on the car? a. $12,765 b. $14,400 c. $14,079 d. $15,265 e. $16,879 6. The down payment on the car you are leasing is called the a. money factor. b. capitalized cost. c. residual value. d. purchase option. e. capitalized cost reduction 7. When refinancing your mortgage, you should consider a. the interest rates of the old and new mortgages. b. the years you expect to remain in the home. c. any prepayment penalties on the old mortgage. d. closing costs of the new mortgage. e. all of these. 8. Points can be deducted from federal income taxes in the year paid when they are used to a. finance a first home. b. finance a second home. c. refinance a first home. d. refinance a second home. e. a and c only 9. The seller of the house typically pays the a. loan application fee. b. real estate agent's commission. c. appraisal fee. d. points. e. title search and insurance. 10. The majority of each monthly payment at the beginning of the loan goes to pay a. principal. b. interest. c. real estate taxes. d. homeowner's insurance. e. private mortgage insurance. 11. Most lenders do not want mortgage payments to exceed ____ percent of your gross monthly income. a. 10-15 b. 15-18 c. 25-30 d. 30-33 e. 33-38 12. At the end of the lease period, you may be required to a. purchase the vehicle at its residual value. b. pay for unreasonable wear and tear. c. pay for additional mileage. d. b and c. e. a, b, and c. 13. Anna purchased a vehicle six years ago for $25,000. She recently sold it for $5,000. Over the years, she paid a total of $5,800 on auto insurance, $4,800 on gas and maintenance, and $2,500 in interest. What was her depreciation cost on this vehicle? a. $ 5,000 b. $10,800 c. $15,000 d. $20,000 e. $25,000 14. Cars typically depreciate 20 to 25 percent during the first ____ months of a car's life. a. 0 - 12 b. 12 - 18 c. 18 - 24 d. 24 - 36 e. 36 - 48 15. Which of the following are reasons people lease vehicles? a. Leasing is generally less expensive than buying. b. Monthly payments for leases are generally less expensive than loan payments. c. One can afford a more expensive car with the same monthly payment by leasing. d. b and c only e. a, b, and c 16. Which of the following should one tell the auto salesperson when shopping for a vehicle? a. The type of vehicle you are interested in purchasing b. Whether you will be trading in your current vehicle c. The type of financing or leasing you prefer d. How much monthly payment you can afford e. All of the above 17. A used car from ____ will generally cost less. a. franchise dealerships b. independent used car lots c. private individuals d. superstores e. lenders 18. Kurt has $4,500 for a down payment and thinks she can afford monthly payments of $300. If he can finance a vehicle with a 7%, 4-year loan, what is the maximum amount Kurt can afford to spend on the car? a. $13,528 b. $14,400 c. $16,028 d. $17,028 e. $18,028 19. Advantages of buying a used car rather than a new car include a. good mechanical condition. b. will depreciate more quickly. c. more choices available. d. less expensive. e. all of the above. 20. Jana has $1,500 for a down payment and thinks she can afford monthly payments of $300. If she can finance a vehicle with a 7%, 4-year loan, what is the maximum loan amount Jana can afford? a. $12,528 b. $14,208 c. $16,028 d. $17,900 e. $18,028 21. ____ could be deducted on your Federal income taxes. a. Rent payments b. Mortgage interest c. Homeowner's insurance d. Utility bills e. None of these 22. If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 80 percent, then the borrower must make a down payment of at least a. $100,000. b. $ 80,000. c. $ 50,000. d. $ 20,000. e. none of these. 23. If you made a down payment of $11,000 on a $110,000 house, the lender no doubt will require ____ as a result of the size of the down payment. a. closing points b. a bond c. mortgage insurance d. application fees e. homeowner's insurance 24. A lender will usually require a loan-to-value ratio of ____ or less for you to avoid having to pay private mortgage insurance (PMI). a. 75% b. 80% c. 85% d. 90% e. 95% 25. Which of the following is not associated with buying a home with a lower-than-typical down payment? a. Adjustable-rate mortgage b. Fannie 3/2 c. Fannie 97 d. FHA mortgage e. VA mortgage


Paper#3726 | Written in 18-Jul-2015

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