Question 1

The fairest method of calculating interest on a credit card is the average daily balance method.

Accepted Answer

A) True 
 B)False

Question 2

If you find that you cannot make your payments,the first thing you should do is:

Accepted Answer

A)  skip town.
B)  declare personal bankruptcy.
C)  borrow from a loan shark to make the payment.
D)  let the balance owed go to a collection agency.
E)  contact your creditors and try to work out a modified payment plan with them.F) A) and E)
G) A) and C)

Question 3

You can deduct the interest paid on consumer loans on your income tax return.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following methods calculates interest on the full amount of the original principal?

Accepted Answer

A)  Declining balance method
B)  Add-on interest method
C)  Previous balance method
D)  Adjusted balance method
E)  Average daily balance methodF) C) and D)
G) A) and C)

Question 5

Credit life insurance provides for the repayment of the loan if the borrower dies.

Accepted Answer

A) True 
 B)False

Question 6

The finance charge is the total dollar amount you pay to use credit.

Accepted Answer

A) True 
 B)False

Question 7

A "float" period can be defined as:

Accepted Answer

A)  the interest charged during one billing period.
B)  the principal balance due on a loan.
C)  a home equity loan.
D)  a certain number of days during which no interest is charged.
E)  a lump-sum loan from a credit union.F) A) and B)
G) D) and E)

Question 8

The Consumer Credit Counseling Service (CCCS)is a lending institution that will refinance all of your existing debts for you.

Accepted Answer

A) True 
 B)False

Question 9

Credit counselors are aware that most people who are in debt over their heads are:

Accepted Answer

A)  criminals who take advantage of creditors.
B)  living in poverty-stricken areas.
C)  expected to declare Chapter 11 bankruptcy.
D)  not college educated.
E)  basically honest people.F) B) and E)
G) A) and B)

Question 10

What are the major sources of consumer credit?

Accepted Answer

The major sources of consumer credit are...

Question 11

An increasing number of personal bankruptcies are made by well-educated,middle-class people,who represent ________ percent of the adult population.

Accepted Answer

A)  70
B)  60
C)  50
D)  40
E)  30F) A) and B)
G) None of the above

Question 12

When more than one payment is made on a simple interest loan,the method of computing interest is known as the declining balance method.

Accepted Answer

A) True 
 B)False

Question 13

Which one of these is the fairest method of calculating finance charges on a credit card?

Accepted Answer

A)  Declining balance method
B)  Adjusted balance method
C)  Current balance method
D)  Average daily balance method
E)  Previous balance methodF) B) and E)
G) A) and E)

Question 14

Both Chapter 7 and Chapter 13 bankruptcy are considered an easy way out of debt.

Accepted Answer

A) True 
 B)False

Question 15

Variations of simple interest do not include the:

Accepted Answer

A)  Add-on interest method
B)  Bank discount method
C)  Adjusted balance method
D)  Simple interest on the declining balance method
E)  Compound interest methodF) None of the above
G) A) and B)

Question 16

Which of the following is not true regarding a tax refund loan?

Accepted Answer

A)  It is an inexpensive way to borrow money.
B)  It lets you get an advance on a tax refund.
C)  APRs as high as 774 percent have been reported.
D)  An alternative to these loans is to ask for more time to pay a bill.
E)  A cash advance on your credit card may cost less.F) All of the above
G) A) and B)

Question 17

Buying on credit is almost always cheaper than paying cash.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following is a local,nonprofit organization that provides debt counseling services for families and individuals with serious financial problems?

Accepted Answer

A)  Credit bureau
B)  Chamber of Commerce
C)  Consumer Credit Counseling Service
D)  Internal Revenue Service
E)  Better Business BureauF) A) and E)
G) B) and D)

Question 19

The CCCS aids families by:

Accepted Answer

A)  setting up a realistic budget for them.
B)  paying off their loans.
C)  providing free basic necessities.
D)  providing one month free shelter.
E)  relocating them in less expensive areas.F) A) and B)
G) B) and E)

Question 20

Anthony Newton wants to buy a new sail boat.He is planning on making a $9,000 cash down payment,which is a large portion of the cost of what he is financing.In which way is Anthony reducing his lender's risk?

Accepted Answer

A)  He is sharing the interest rate risk with his lender.
B)  He is pledging valuable assets that can be seized if the loan is not repaid.
C)  He is taking a higher stake in the asset he is purchasing.
D)  He is repaying the loan over a faster period of time.
E)  He is increasing his monthly payments.F) B) and D)
G) B) and C)

Exam 7: Choosing a Source of Credit: the Costs of Credit Alternatives

Both Chapter 7 and Chapter 13 bankruptcy are considered an easy way out of debt.

Correct AnswerverifiedShow Answer

The fairest method of calculating interest on a credit card is the average daily balance method.

Correct AnswerverifiedShow Answer

Which one of the following is a local,nonprofit organization that provides debt counseling services for families and individuals with serious financial problems?

Correct AnswerverifiedShow Answer

Variations of simple interest do not include the:

Correct AnswerverifiedShow Answer

Credit life insurance provides for the repayment of the loan if the borrower dies.

Correct AnswerverifiedShow Answer

The finance charge is the total dollar amount you pay to use credit.

Correct AnswerverifiedShow Answer

If you find that you cannot make your payments,the first thing you should do is:

Correct AnswerverifiedShow Answer

Anthony Newton wants to buy a new sail boat.He is planning on making a $9,000 cash down payment,which is a large portion of the cost of what he is financing.In which way is Anthony reducing his lender's risk?

Correct AnswerverifiedShow Answer

When more than one payment is made on a simple interest loan,the method of computing interest is known as the declining balance method.

Correct AnswerverifiedShow Answer

You can deduct the interest paid on consumer loans on your income tax return.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding a tax refund loan?

Correct AnswerverifiedShow Answer

A "float" period can be defined as:

Correct AnswerverifiedShow Answer

Which one of these is the fairest method of calculating finance charges on a credit card?

Correct AnswerverifiedShow Answer

Buying on credit is almost always cheaper than paying cash.

Correct AnswerverifiedShow Answer

The CCCS aids families by:

Correct AnswerverifiedShow Answer

What are the major sources of consumer credit?

Correct AnswerverifiedThe major sources of consumer credit are...View AnswerShow Answer

Credit counselors are aware that most people who are in debt over their heads are:

Correct AnswerverifiedShow Answer

An increasing number of personal bankruptcies are made by well-educated,middle-class people,who represent ________ percent of the adult population.

Correct AnswerverifiedShow Answer

Which of the following methods calculates interest on the full amount of the original principal?

Correct AnswerverifiedShow Answer

The Consumer Credit Counseling Service (CCCS)is a lending institution that will refinance all of your existing debts for you.

Correct AnswerverifiedShow Answer

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The major sources of consumer credit are...
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