Question 1

Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.

Accepted Answer

A) True 
 B)False

Question 2

A personal bankruptcy remains on a credit file for no more than 5 years.

Accepted Answer

A) True 
 B)False

Question 3

If you miss payments on a home equity loan, you can lose your

Accepted Answer

A)   Savings account.
B)   Car.
C)   House.
D)   Retirement account.
E)   Furnishings.F) A) and B)
G) A) and D)

Question 4

When used effectively, credit can help a consumer have more and enjoy more.

Accepted Answer

A) True 
 B)False

Question 5

Home equity loans should be used for

Accepted Answer

A)   Buying dinner at a restaurant.
B)   Borrowing money for impulse purchases.
C)   Major expenses such as home improvements or education.
D)   Getting cash for weekend entertainment.
E)   Selling a car.F) A) and E)
G) A) and D)

Question 6

Tanya received a $1,000 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 9% loan. What is her total interest?

Accepted Answer

A)   $9
B)   $45
C)   $90
D)   $450
E)   $1,009F) A) and D)
G) C) and D)

Question 7

The Consumer Credit Counseling Service

Accepted Answer

A)   Aids families with serious debt problems by helping them to manage their money better and set up a realistic budget.
B)   Is a consolidation firm that will manage bills for a percentage of the total payment due.
C)   Is a for profit organization
D)   Is a program to wipe out your debts within two years.
E)   Is a program to setup bankruptcy proceedingsF) B) and C)
G) B) and D)

Question 8

Installment credit, in which the debt is repaid in equal installments over a specified period of time, exploded on the American scene with the advent of the

Accepted Answer

A)   Airplane
B)   Automobile
C)   Cell phone
D)   Computer
E)   TrainF) A) and B)
G) A) and C)

Question 9

Paul borrowed $200 to be repaid in one year. He paid 10% interest and a service charge of $3.00. What is his finance charge?

Accepted Answer

A)   $3.00
B)   $20.00
C)   $23.00
D)   $200.00
E)   $223.00F) A) and C)
G) A) and B)

Question 10

The higher your FICO score, the more risk you pose to creditors.

Accepted Answer

A) True 
 B)False

Question 11

To protect your credit card, you should keep a record of your credit card number separate from your card.

Accepted Answer

A) True 
 B)False

Question 12

Experts suggest that the debt payments-to-income ratio should be a maximum of

Accepted Answer

A)   15%
B)   20%
C)   25%
D)   50%
E)   100%F) B) and C)
G) C) and E)

Question 13

Many people use credit to live within their means.

Accepted Answer

A) True 
 B)False

Question 14

What step can you take if your credit application is denied?

Accepted Answer

A)   Sue the credit rating agency.
B)   File a complaint against the merchant.
C)   Ask the reasons why you were denied credit.
D)   Reapply for credit once 30 days have passed.
E)   Borrowers do not have any rights provided by law.F) A) and E)
G) A) and D)

Question 15

The easiest loans to obtain are also the least expensive.

Accepted Answer

A) True 
 B)False

Question 16

The information gathered from your loan application and the credit bureau establishes your credit rating.

Accepted Answer

A) True 
 B)False

Question 17

If a loan is being paid in installments instead of one lump sum at the end of the loan period, the actual rate of interest

Accepted Answer

A)   Will be lower than the stated rate.
B)   Will be the same as the stated rate.
C)   Will be higher than the stated rate.
D)   Will be unrelated to the stated rate.
E)   Cannot be determined without knowing the length of the loan period.F) A) and D)
G) B) and D)

Question 18

According to the Fair Credit Billing Act of 1975, a consumer may tell a credit card company to stop payment for a defective good if the consumer has made a sincere attempt to resolve the problem with the store.

Accepted Answer

A) True 
 B)False

Question 19

Hannah has liabilities totaling $30,000 (excluding her mortgage of $100,000) . Her net worth is $45,000. What is her debt-to-equity ratio?

Accepted Answer

A)   .45
B)   .67
C)   .75
D)   1.00
E)   1.30F) B) and C)
G) B) and D)

Question 20

Closed-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.

Accepted Answer

A) True 
 B)False

Exam 5: Consumer Credit: Advantages, Disadvantages, Sources, and Costs

According to the Fair Credit Billing Act of 1975, a consumer may tell a credit card company to stop payment for a defective good if the consumer has made a sincere attempt to resolve the problem with the store.

Correct AnswerverifiedShow Answer

If you miss payments on a home equity loan, you can lose your

Correct AnswerverifiedShow Answer

The higher your FICO score, the more risk you pose to creditors.

Correct AnswerverifiedShow Answer

Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.

Correct AnswerverifiedShow Answer

Experts suggest that the debt payments-to-income ratio should be a maximum of

Correct AnswerverifiedShow Answer

Closed-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.

Correct AnswerverifiedShow Answer

Many people use credit to live within their means.

Correct AnswerverifiedShow Answer

The information gathered from your loan application and the credit bureau establishes your credit rating.

Correct AnswerverifiedShow Answer

A personal bankruptcy remains on a credit file for no more than 5 years.

Correct AnswerverifiedShow Answer

Paul borrowed $200 to be repaid in one year. He paid 10% interest and a service charge of $3.00. What is his finance charge?

Correct AnswerverifiedShow Answer

When used effectively, credit can help a consumer have more and enjoy more.

Correct AnswerverifiedShow Answer

What step can you take if your credit application is denied?

Correct AnswerverifiedShow Answer

Hannah has liabilities totaling $30,000 (excluding her mortgage of $100,000) . Her net worth is $45,000. What is her debt-to-equity ratio?

Correct AnswerverifiedShow Answer

The easiest loans to obtain are also the least expensive.

Correct AnswerverifiedShow Answer

If a loan is being paid in installments instead of one lump sum at the end of the loan period, the actual rate of interest

Correct AnswerverifiedShow Answer

Home equity loans should be used for

Correct AnswerverifiedShow Answer

To protect your credit card, you should keep a record of your credit card number separate from your card.

Correct AnswerverifiedShow Answer

Installment credit, in which the debt is repaid in equal installments over a specified period of time, exploded on the American scene with the advent of the

Correct AnswerverifiedShow Answer

The Consumer Credit Counseling Service

Correct AnswerverifiedShow Answer

Tanya received a $1,000 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 9% loan. What is her total interest?

Correct AnswerverifiedShow Answer

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