BUS 225 Personal Finance

If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within _____ of notification that your credit application has been denied. Multiple Choice 10 days 20 days 30 days 60 days 90 days

60

Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a debtor seeking to erase all debts will have to wait ___ year(s) from her last bankruptcy before she can file again. Multiple Choice one three seven eight ten

8

What step can you take if your credit application is denied? Multiple Choice Sue the credit rating agency. File a complaint against the merchant. Ask the reasons why you were denied credit. Reapply for credit once 30 days have passed. Borrowers do not have any rights provided by law.

Ask the reasons why you were denied credit.

The use of property or savings to secure a loan relates to: Multiple Choice Character. Capacity. Capital. Collateral. Conditions.

Collateral.

When evaluating your credit application, a lender may NOT: Multiple Choice Ask your date of birth. Deny you credit if you receive public assistance. Request a list of the ages of your dependents. Inquire if you ever received credit before from that lender. Ask your marital status.

Deny you credit if you receive public assistance.

A credit report includes: Multiple Choice Detailed credit information. Bank statements. All previous employers. Credit card statements. All of these. PrevQuestion 5 of 10 Total5

Detailed credit information.

Joshua borrowed $1,600 for one year and paid $80 in interest. The bank charged him a service charge of $6. If Joshua repaid the loan in 12 equal monthly payments, what is the APR? (Enter your answer as a percent rounded to 1 decimal place.)

Explanation Finance charge = Interest + Service charge= $80 + $6= $86 APR = (2 × n × I)/[P(N + 1)]= (2 × 12 × $86)/[$1,600(12 + 1)]= 0.099, or 9.9%

Robert Sampson owns a townhouse valued at $193,000 and still has an unpaid mortgage of $158,000. In addition to his mortgage, he has the following liabilities: Visa $ 900 MasterCard 250 Discover card 500 Education loan 2,000 Personal bank loan 300 Auto loan 4,000 Total$ 7,950 Robert's net worth (not including his home) is about $47,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property. a. What is Robert's debt-to-equity ratio? (Round your answer to 2 decimal places.) b. Has he reached the upper limit of debt obligations? Yes or No

Explanation a. Debt-to-equity ratio = Total debt excluding mortgage/Net worth excluding home= $7,950/$47,000= 0.17 b. The upper limit of the debt-to-equity ratio is 1, so he has not reached his upper limit.

After visiting several automobile dealerships, Richard selects the car he wants. He likes its $11,000 price, but financing through the dealer is no bargain. He has $2,200 cash for a down payment, so he needs a loan of $8,800. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,800 for a period of four years at an add-on interest rate of 8 percent. a. What is the total interest on Richard's loan? b. What is the total cost of the car? c. What is the monthly payment? d. What is the annual percentage rate (APR)? (Enter your answer as a percent rounded to 2 decimal places.)

Explanation a. I = P × r × T= $8,800 × 0.08 × 4= $2,816 b. Total cost = Down payment + Interest + Principal= $2,200 + $2,816 + $8,800= $13,816 c. Monthly payment = (Interest + Principal)/Number of months= ($2,816 + $8,800)/(4 × 12)= $242 d. APR = (2 × n × I)/[P(N + 1)]= (2 × 12 × $2,816)/[$8,800(48 + 1)]= 0.1567, or 15.67%

Louise McIntyre's monthly gross income is $3,600. Her employer withholds $760 in federal, state, and local income taxes and $310 in Social Security taxes per month. Louise contributes $160 each month to her IRA. Her monthly credit payments for VISA and MasterCard are $95 and $90, respectively. Her monthly payment on an automobile loan is $345. a. What is Louise's debt payments-to-income ratio? (Enter your answer as a percent rounded to 2 decimal places.) b. Is Louise living within her means?

Explanation a. Net income = Gross income − Income taxes − Social Security taxes − IRA contribution= $3,600 − $760 − $310 − $160= $2,370 Monthly debt payments = VISA + MasterCard + Car loan= $95 + $90 + $345= $530 Debt payments-to-income ratio = Total debt payments/After-tax income= $530/$2,370= 0.2236, or 22.36% b. Experts suggest that you spend no more than 20 percent of your net (after-tax) income on consumer credit payments. A debt payments-to-income ratio less than 20 percent indicates living within one's means, while a ratio in excess of 20 percent indicates an individual is living beyond his/her means.

If you think your identity has been stolen, which of the following actions does the Federal Trade Commission recommend you take immediately? Multiple Choice Report it to your neighbor Call 911 Contact your local bank File a police report Contact your employer

File a police report

Credit reports can be obtained for all of the following reasons except: Multiple Choice In response to a court order. In connection with a credit transaction. For underwriting of insurance. Inquiry by a neighbor. For some legitimate business need.

Inquiry by a neighbor.

Credit files can include all of the following except: Multiple Choice Employer, position, and income. Previous address. Spouse's name, Social Security number, employer, and income. Race or nationality. Checks returned for insufficient funds.

Race or nationality.

Credit bureaus get their information from all of the following sources except: Multiple Choice Banks. Credit card companies. Finance companies. References. Stores.

References.