PFP Exam 2: Part 2

If Liza's debt safety ratio is 15% and her monthly take-home pay is $4,500, which of the following equals her total monthly payments?

$675

Which of the following statements regarding loan collateral is true?

Collateral is an item of value used to secure the principal portion of a loan.

Which of the following statements regarding consumer finance companies is true?

Consumer finance companies make secured and unsecured loans to qualified individuals.

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

Credit Unions

If the add-on method is used to calculate a finance charge of $100.80 on a $1,800 loan, the amount to be:

Disbursed to the borrower is $1,800

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of

Interim Financing

Which of the following statements regarding single-payment loans is true?

They usually mature in 1 year or less.

When the simple interest method is used to determine finance charges, the interest is calculated based on the:

actual balance of the loan

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 the installment loan will be the:

add-on method

Consumer finance companies:

are managed by large manufacturing companies

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

balance due

Sales finance companies:

buy installment loans from retailers.

A _____ loan is intended to help consumers who have an unhealthy credit situation caused by overusing their credit.

consolidation

Calculating interest using the _____ will result in the highest APR on a single-payment loan.

discount method

Which of the following is a nondepository institution?

interim financing

A legal claim that allows creditors to liquidate loan collateral is a:

lien

Most loans made by savings and loan associations are:

morgage loans

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be

repaid is $2,200.

Section I of a homeowner's insurance policy covers:

the dwelling, accompanying structures, and personal property of the insured.

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions

variable-rate