Question;1. Interest on credit cards can be very expensive. One way toreduce interest would be toA. pay the minimum monthly required payment on time.B. pay the minimum monthly payment early.C. pay the entire balance before the grace period and usethe card for convenience.D. use the card for cash advances.2. In addition to interest expenses, many credit cards have othercosts, which can include which of the following?A. Vendor discounts C. Application feesB. Annual fees D. Travel fees3. A method to charge interest that involves calculating the finance charge and deducting itup front from the loan is called the _______ method.A. simple interest C. discountB. compound interest D. future value4. The rule of 78s or sum-of-the digits method would be used to calculateA. interest. C. estimated present value.B. an insurance premium. D. a prepayment penalty.5. Many lenders use credit scoring to assist them in making credit decisions. The mostimportant credit-scoring factor isA. marital status. C. annual income.B. length of employment. D. age.6. The annual percentage rate (APR) on a single-payment loan for $1,000 at a simple interestrate of 12% isA. 10%. C. 15%B. 12% D. 18%7. You?ve agreed to make payments of principal and interest over the next 36 months to afurniture dealer for a new suite of furniture. Which type of loan is this?A. Single payment C. Open account creditB. Interim financing D. Installment loan8. Purchasing credit life or disability insurance protection is usuallyA. a legal requirement. C. non-negotiable.B. at the borrower?s option. D. a good idea for the borrower.9. You want the convenience of paying for goods and services with ?plastic.? However, youwant to avoid any risk of generating a credit balance on which you might incur interestexpenses. Which card would be best for you?A. Affinity card C. Secured credit cardB. Debit card D. Prestige card10. You have a car, a house, credit cards, and other debts and assets.You want to consolidatedebt and achieve the lowest possible after-tax cost of borrowing.You should consider whichtype of loan?A. Credit card advance C. Overdraft protectionB. Consumer installment loan D. Home equity credit line11. You?re borrowing for education.You want to eliminate interest rate risk and pay the loanback in future years when you can better afford the payments.Your degree will give you achance to earn a higher income in the future. Which type of loan is best for you?A. Long-term fixed rate loan C. Long-term floating rate loanB. Short-term fixed rate loan D. Short-term floating rate loan12. You want to establish credit, but you want to deal with one institution for all your bankingand credit services.Your best choice would be aA. savings and loan. C. commercial bank.B. finance company. D. credit union.13. If your installment loan has a variable interest rate,A. the rate will remain the same over the life of the loan.B. the amount you borrowed will change with the interest rates.C. the total interest to be paid over the life of the contract isn?t known at the startof the loan.D. you can calculate the total interest you?ll pay on the loan.14. Credit cards permit us to enjoy payment convenience when shopping. However, a dangerof using credit cards isA. the computation of interest. C. retailer warranties.B. the monthly billing cycle. D. overspending due to easy credit.15. As opposed to mortgage loans and auto loans, open-credit loans can lead to excessivedebt levels becauseA. homeownership is important to the economy.B. we all have to have cars.C. the products purchased may not outlive the payments.D. the required payment changes every month.16. Because of the Tax Reform Act of 1986, what percent of your consumer loan interest isnow tax deductible?A. 40% C. 20%B. 30% D. 0%17. You have a debt safety ratio of 40%.You should consider which one of the followingactions?A. Cut spending until you reduce the ratio to 20%B. Cut spending until you bring the ratio to zeroC. Keep spending the sameD. Increase spending, but only for useful items18. Often lenders will be reluctant to approve a loan because they perceive the credit risk to betoo high. A frequently used technique to improve credit risk is to offer tangible assets. Suchan asset is consideredA. pledging. C. credit base.B. collateral. D. improved cash flow.19. If your monthly take-home pay is $1,500, you maximum monthly consumer credit paymentsshouldn?t exceedA. $420. C. $300.B. $330. D. $225.20. The federal requirements for disclosure of interest rates defines the annual percentage rateor APR. The formula to calculate the APR isA. total finance charges divided by yearly principal payments.B. total finance charges divided by loan principal.C. average annual finance charge divided by average loan balance outstanding.D. total annual finance charge divided by average loan balance outstanding.
Paper#48425 | Written in 18-Jul-2015Price : $22