Financial Math: Consumer Credit topic test

Antonio's credit card has an APR of 16.65%, and it calculates his finance charge by using the daily balance method and a 30-day billing cycle. On June 1st, Antonio had a balance of $811.67. During the month of June, he made a payment of $110.16 and a purchase of $84.04. How much greater will his June finance charge be if the purchase occurred on June 5th and the payment occurred on June 23rd than it would be if the payment occurred on June 5th and the purchase occurred on June 23rd? a.$0.44 b.$1.59 c.$4.96 d.$0.36

B

Calvin works at a facility which processes apples. It costs the facility $0.68 to make either a jar of applesauce or a bottle of apple juice. Due to the nature of the process and contractual agreements, Calvin's facility must make and sell three jars of applesauce for every two bottles of apple juice. A jar of applesauce sells for $2.20, and a bottle of apple juice sells for $3.15. If the facility has annual overhead costs of $368,500, not including production costs, how many bottles of apple juice will the facility have sold when it breaks even every year? Round to the nearest whole bottle, if necessary. a.38,789 b.77,579 c.116,368 d.167,500

B

Describe the effect an increase in i, the interest rate applied to the present value, has on the monthly payment P in the formula a.An increase in i, the interest rate, will not change P, the monthly payment. b.An increase in i, the interest rate, will create an increase in P, the monthly payment. c.An increase in i, the interest rate, will create a decrease in P, the monthly payment. d.An increase in i, the interest rate, can increase or decrease P, the monthly payment, depending on the value of PV.

B

Eric is comparing the credit scores of his friends. The scores he gathered are found in the table below. a.The mean is 113 points higher than the median. b.The mean is 1 point higher than the median. c.The median is 15 points higher than the mean. d.The median is 8 points higher than the mean.

B

Esteban bought a new stove for $986 on his credit card. He used the stove for eleven years before replacing it. The stove cost him an average of $0.14 per day in electricity. Esteban had preventive maintenance done on the stove, costing $24.25 each year for the eleven years. Esteban's credit card has an APR of 9.26%, compounded monthly. He paid off his balance by making identical monthly payments for five years. Sales tax in Esteban's area is 8.22%. Assuming that Esteban made no other purchases or payments with his credit card, what was the lifetime total cost of the stove? (Assume that two of the years Esteban had the stove were leap years, and round all dollar values to the nearest cent.) a.$2,534.57 b.$2,166.53 c.$2,234.23 d.$2,064.53

B

Gregory has a credit card with a 30-day billing cycle and an APR of 11.95%. The following table shows Gregory's credit card transactions for the month of April. a.The daily balance method will have a finance charge $0.09 greater than the adjusted balance method. b.The daily balance method will have a finance charge $0.54 greater than the adjusted balance method. c.The adjusted balance method will have a finance charge $1.40 greater than the daily balance method. d.The adjusted balance method will have a finance charge $0.86 greater than the daily balance method.

B

Jessica's credit card is on a 30-day billing cycle, and it computes finance charges using the adjusted balance method. The following table details Jessica's use of her credit card in the month of October. a.$1,136.71 b.$1,033.76 c.$1,140.55 d.$1,240.55

B

Jordan's credit card has an APR of 10.59%, compounded monthly. He is required to make a minimum payment of 3.96% of his current balance every month. a.$1,094.10 b.$988.97 c.$967.60 d.$1,070.23

B

Olivia bought a $1,874 sprinkler system with her credit card. Her credit card has an APR of 10.31%, compounded monthly. She made no other purchases on the card until the sprinkler system was fully paid for, which took four years of identical monthly payments. a.81.66% b.59.07% c.38.25% d.72.33%

B

Pam has just moved into a new home and wants to purchase an oven. She expects to live in this house for the foreseeable future. She has narrowed her choices down to two options. Consider the following table, which describes the prices, daily electricity costs, and lifespans of the two ovens she is considering: a.Brand U will be $1,051.92 cheaper than Brand V. b.Brand U will be $976.92 cheaper than Brand V. c.Brand V will be $75 cheaper than Brand U. d.Brand V will be $2109.40 cheaper than Brand U.

B

Patrick has a credit card with an APR of 15.40% and a billing cycle of 30 days. The following table shows Patrick's credit card transactions in the month of August. a.$2.44 b.$3.41 c.$2.13 d.$4.69

B

Sam is getting ready for a big date when he realizes that he has no money. His roommate, Bill, also has no money, but he has a credit card. a.$3.88 b.$112.80 c.$120.00 d.$232.80

B

Tony is a loan officer. He determines his clients' eligibility for loans and for good interest rates by using their credit scores. The scores of several clients are shown in the following table. a.Jeff has the highest mean score, but Paula has the highest median score. b.Neil has the highest mean score, but Jeff has the highest median score. c.Neil has the highest mean score and the highest median score. d.Paula has the highest mean score, but Jeff has the highest median score.

B

What is the name of the legally mandated area on every credit solicitation which provides information about the terms and conditions of the card? a.Schroeder Box b.Schumer Box c.Disclosure Box d.Disclaimer Box

B

Which of the following is not a disadvantage to cash advances on a credit card? a.Cash advances are similar to loans in that they need to be paid back with interest. b.Cash advances require a lot of paperwork and are generally difficult to get. c.Cash advances are often the last thing to be paid when paying off your credit card. d.Cash advances often come with an interest rate much higher than your credit card.

B

Which of the following statements is not true of cash advances? a.Credit card companies offer easy access to cash through ATM's or checks that can be written to yourself and cashed. b.Credit card companies apply payments to cash advance balances first because the interest is higher. c.The APR of a cash advance is higher than that of regular credit card purchases. d.Credit card companies place limits on the amount of cash you can receive through a cash advance.

B

Who can access your credit report? a.friends b.employers c.neighbors d.teachers

B

You are considering making a major purchase on your credit card. You should ask yourself the following questions, except which answer choice? a.Would it cost me less if I came up with a different purchasing plan? b.What else can I purchase to reach my full credit limit? c.Will I receive any incentives from my credit card company for making this purchase? d.How much will my purchase really end up costing if I don't pay off the balance immediately?

B

Credit cards can only lead to debt that is difficult to eliminate and should be avoided at all costs.

False

Arderi Air Conditioning sells one primary model of air conditioner. Each unit of this model costs them $61.25 to produce, but it sells for $142.50 apiece. Arderi Air Conditioning employs three salespeople, each of whom earns a different commission per unit sold, as shown on the following table. a.Mary sells 54 units; Jay sells 51 units; Abby sells 43 units b.Mary sells 54 units; Jay sells 43 units; Abby sells 51 units c.Mary sells 43 units; Jay sells 51 units; Abby sells 54 units d.Mary sells 43 units; Jay sells 54 units; Abby sells 51 units

C

Calvin's credit card computes finance charges using the daily balance method. His card has a billing cycle of 30 days and an APR of 14.75%. The following table details Calvin's transactions in the month of September. a.$617.17 b.$624.74 c.$625.91 d.$623.52

C

David has a credit card with an APR of 13.59% and a 30-day billing cycle. The table below details David's transactions with that credit card in the month of November. a.The daily balance method will have a finance charge $1.59 greater than the previous balance method. b.The daily balance method will have a finance charge $0.40 greater than the previous balance method. c.The previous balance method will have a finance charge $0.96 greater than the daily balance method. d.The previous balance method will have a finance charge $2.55 greater than the daily balance method.

C

Elizabeth's credit card computes her finance charges using the previous balance method and a 30-day billing cycle. The table below shows Elizabeth's credit card transactions in July. a.$9.97 b.$12.62 c.$11.80 d.$10.80

C

Freida's credit card has an APR of 13.73%, and it calculates her finance charge by using the daily balance method and a 30-day billing cycle. On September 1st, Freida had a balance of $449.22. During the month of September, she made a payment of $85.33 and a purchase of $60.99. How much greater will her September finance charge be if the purchase occurred on September 7th and the payment occurred on September 20th than it would be if the payment occurred on September 7th and the purchase occurred on September 20th? a.$0.13 b.$0.41 c.$0.72 d.$0.28

C

Hannah has a credit card with an APR of 11.90% and a billing cycle of 30 days. The following table shows Hannah's transactions in the month of April. If Hannah's credit card company calculates finance charges using the daily balance method, what will her April finance charge be? a.$2.71 b.$3.20 c.$3.30 d.$3.61

C

Hannah has a credit card with an APR of 11.90% and a billing cycle of 30 days. The following table shows Hannah's transactions in the month of April. a.$2.71 b.$3.20 c.$3.30 d.$3.61

C

How can credit cards be safer than cash? a.It is harder to lose a single credit card than a large number of bills. b.A credit card requires a signature, so it is impossible for anyone other than you to use. c.If a merchant does not hold up their end of an agreement, you can call the credit company and dispute the charges. d.Cash can be miscounted, but credit cards cannot.

C

Jason is looking for an engagement ring to offer his girlfriend. He has found a similar ring at each of four different jewelry stores. He doesn't have enough money to pay for the ring in cash, so he is planning on opening a line of credit (credit card) at the store he ends up buying the ring from. The chart below outlines the difference in the price of the rings the different stores offer as well as the difference in credit options. Jason plans to pay off the ring purchase in 36 months. According to the information in the table, which of the jewelry stores will have the cheapest ring in the end? a.Jessie's Jewelry b.Über Pawn c.Diamonds Forever d.Drake and Family Gold

C

Jennifer has a credit card with an APR of 10.22% and a billing cycle of 30 days. The following table shows Jennifer's credit card transactions in the month of January. a.$0.48 b.$1.15 c.$0.67 d.$0.85

C

Listed below are the balances and annual percentage rates for Jimmy's credit cards. If Jimmy makes the same payment each month to pay off his entire credit card debt in the next 12 months, how much will he have paid in interest in the 12 month period? a.$321.83 b.$370.75 c.$449.24 d.$730.80

C

Maya's credit card has an APR of 11.84% and a billing cycle of 30 days. The table below shows her transactions with that credit card in the month of September. a.$3.79 b.$3.90 c.$3.68 d.$4.45

C

Natasha had a $922.93 balance on her credit card at the beginning of September. Her credit card has an APR of 9.89%, compounded monthly, and a minimum monthly payment of 3.08% of the total balance. The following table shows Natasha's credit card purchases over the next two months. a.$1,180.48 b.$1,064.55 c.$1,000.93 d.$1,123.97

C

Of the following statements, which one or ones describe actions helpful to your credit score? I. Quickly paying off debts II. Having recent debts III. Having long-standing lines of credit a.I only b.II and III c.I and III d.III only

C

Use the following compound interest formula to complete the problem. Sandra has two credit cards, P and Q. Card P has a balance of $726.19 and an interest rate of 10.19%, compounded semiannually. Card Q has a balance of $855.20 and an interest rate of 8.63%, compounded monthly. Assuming that Sandra makes no purchases and no payments with either card, after four years, which card's balance will have increased by more, and how much greater will that increase be? a.Card Q's balance increased by $7.22 more than Card P's balance. b.Card Q's balance increased by $6.69 more than Card P's balance. c.Card P's balance increased by $3.43 more than Card Q's balance. d.Card P's balance increased by $0.80 more than Card Q's balance.

C

Ruth's credit card has an APR of 10.91%, and it computes finance charges using the previous balance method on a 30-day billing cycle. During the April billing cycle, she made a $45.17 payment on April 10th and a $88.34 purchase on April 17th. Her total at the start of May was $847.64. What was her balance at the beginning of April? a.$890.91 b.$797.22 c.$796.87 d.$804.47

B

Brian bought a new air conditioning unit on his credit card. The unit had a base price of $435. Brian made no other purchases on his credit card. Brian's credit card has an interest rate of 9.4%, compounded monthly, and Brian paid off the balance by making monthly payments for a year and a half. If the sales tax in Brian's area is 8.51%, how much did Brian pay in total? (Round all dollar values to the nearest cent.) a.$472.02 b.$468.00 c.$496.32 d.$507.96

D

Choose the most appropriate action for making a large purchase. a.use a credit card with attractive perks and high interest b.use a low interest credit card and wait until the last month to pay off debt c.even if you have to make a few late payments, use a credit card for simplicity d.pause before purchasing to ask yourself, "Do I need this item and can I afford it?"

D

Christopher has a credit card with an APR of 13.13%. The card uses the adjusted balance method to calculate finance charges. The following table details Christopher's transactions with his credit card in the month of December. a.$509.91 b.$349.61 c.$353.44 d.$513.74

D

Connie has two credit cards, U and V. Card U has a balance of $414.55, and Card V has a balance of $751.81. The minimum monthly payment on Card U is 2.82% of the balance, and the minimum monthly payment on Card V is 3.09% of the total balance. How much greater is the minimum payment on Card V than on Card U? a.$8.70 b.$10.73 c.$9.51 d.$11.54

D

Abby has a credit card which uses the adjusted balance method to compute finance charges. Her card has an APR of 11.83%, and she is on a 30-day billing cycle. The table below shows her transactions in the month of January. a.$6.08 b.$7.12 c.$7.22 d.$8.25

A

Dennis has a credit card with an APR of 10.14% and a billing cycle of 30 days. The following table shows his transactions with that credit card in the month of November. a.adjusted balance method b.previous balance method c.daily balance method d.there is not enough information to determine which method was used

A

From the statements below, identify the way or ways in which making only minimum monthly payments on a long-term credit purchase can be a disadvantage. I. It is illegal to make only the minimum payments for more than one year. II. Repeatedly making minimum payments harms your credit score. III. The total cost is higher if the length of the debt is longer. a.I and II b.II only c.I and III d.II and III

D

Michael has a credit card with an APR of 15.33%. It computes finance charges using the daily balance method and a 30-day billing cycle. On April 1st, Michael had a balance of $822.05. Sometime in April, he made a purchase of $77.19. This was the only purchase he made on this card in April, and he made no payments. If Michael's finance charge for April was $10.71, on which day did he make the purchase? a.April 5th b.April 10th c.April 15th d.April 20th

D

Fran is going to transfer her credit card balance over to a new card. She has an existing balance of $752.69. Her current card charges her a transfer fee of 12.5%, added to her balance, for transferring her debt. The new card has an opening fee of $50, which is also added to her balance. She will also have to make an immediate minimum payment, which is 3.35% of her total balance. How much will her balance be after she makes this payment, assuming that she pays the minimum amount? Round all dollar values to the nearest cent. a.$866.74 b.$868.40 c.$818.41 d.$926.82

A

Of the following statements, which one or ones indicate possible effects of a low credit score? I. You will have a difficult time qualifying for loans. II. Any loans you take out will be relatively short-term. III. You will have to pay higher than average interest rates. a.I only b.I and II c.III only d.I and III

D

Of the following statements, which one or ones indicate possible effects of a low credit score? a.I only b.I and II c.III only d.I and III

D

Seth has just decided to replace his computer. His old computer cost him $1,433 when he bought it exactly seven years ago. Seth paid for it with his credit card, which has an APR of 11.70%, compounded monthly. a.82.157% b.58.500% c.21.718% d.54.898%

D

Tim has four credit cards with the balances and APRs listed in the chart below. What will Tim's total monthly minimum credit card payment need to be to pay off all four credit cards in 24 months? a.$118.24 b.$162.62 c.$163.00 d.$221.93

D

What is a secure line of credit? a.A line of credit offered only to individuals with excellent credit ratings. b.A line of credit offered to a business or corporation. c.A line of credit backed by the government. d.A line of credit backed by collateral.

D

Which answer choice does not represent an advantage to using credit cards over other forms of payment? a.payments made online with credit card b.payments made abroad with credit card c.emergency contact number for lost card d.interest due on outstanding balance

D

Which method of calculating finance charge results in the lowest finance charge? a.average daily balance b.previous balance c.ending balance d.adjusted balance

D

Which of the following is not a disadvantage of using cash instead of credit? a.Using cash will not help you improve your credit rating. b.Using cash can be awkward when making large purchases. c.Using cash generally requires trips to the bank or ATM to keep cash on hand. d.Using cash can make it easier to over-spend since you know exactly how much you have.

D

Which of the following is not a kind of consumer credit? a.installment credit b.personal loans c.service credit d.marginal credit

D

Which of the following types of credits would best describe credit cards? a.closed and secured b.closed and unsecured c.open and secured d.open and unsecured

D

Will's boss has asked him to compile the credit scores of everyone in his department. The data that Will collected is shown in the table below. a.667 b.722 c.627 d.There is no mode in this group.

D

Gareth has just remodeled his kitchen and wants to buy one of two stand-alone freezers. Consider the following table, which displays the prices, electricity costs, and lifespans of the two freezers he is considering: No matter which brand he chooses, Gareth will pay for the freezer on his credit card, which has an APR of 9.31%, compounded monthly. It takes Gareth eighteen months to pay off a Brand S freezer and four years to pay off a Brand R freezer. Assuming that Gareth makes no other purchases or payments with his credit card, over the next ten years, which brand of freezer will have a lower lifetime cost, and how much lower will it be? (Round all dollar values to the nearest cent.) a.Brand R will be $548.18 cheaper than Brand S. b.Brand R will be $712.40 cheaper than Brand S. c.Brand S will be $85.00 cheaper than Brand R. d.Brand S will be $164.22 cheaper than Brand R.

A

Hal is going over the credit scores he received from the three major credit bureaus. He Experian score is 711, his Equifax score is 736, and his TransUnion score is 736. What is the mode of Hal's credit scores? (Round to the nearest whole point, if applicable.) a.736 b.728 c.723 d.There is no mode in this group.

A

Jason's credit card has an APR of 17.02% and a 30-day billling cycle. The following table details Jason's transactions with that card in the month of June. a.The daily balance method will have a finance charge $1.02 greater than the adjusted balance method. b.The daily balance method will have a finance charge $0.03 greater than the adjusted balance method. c.The adjusted balance method will have a finance charge $2.36 greater than the daily balance method. d.The adjusted balance method will have a finance charge $1.37 greater than the daily balance method.

A

Jeff has a balance of $2,513.77 on his credit card. He would like to pay off his card over the course of a year and a half by making identical monthly payments. The APR on his card is 10.66%, compounded monthly. Assuming that Jeff makes no additional purchases with his card, how much will he have to pay every month to reach his goal? (Round all dollar values to the nearest cent.) a.$151.73 b.$162.57 c.$139.65 d.$147.64

A

Jenny used her credit card to buy a refrigerator with a base cost of $824. The refrigerator consumed an average of $0.09 in electricity every day. Jenny made regular monthly payments for three and a half years, at which point the refrigerator was paid off. a.$1,528.47 b.$1,622.46 c.$1,779.63 d.$1,457.91

A

June has decided to take up quilting. She bought a sewing machine for $135. It costs her $11.75 in raw materials to make a quilt, and she can sell a quilt for $28.50. Which of the following graphs best illustrates June's situation? a. I b. II c. III d. IV

A

Kevin is looking at two brands of washing machines. Between water and electricity, a Brand C washer uses about $0.65 per load, and a Brand D washer uses about $0.27 per load. Kevin averages about five loads of laundry per month. After one year, how much more would the utility costs for a Brand C washer be than the utility costs for a Brand D washer? a.$22.80 b.$16.20 c.$7.60 d.$19.00

A

Looking for some furniture for her new apartment, Susan visits the local swap meet in search of something cheap. Knowing that most swap meet vendors will not accept credit cards and that she will not have any money until her next payday, Susan decides to take out a $200 cash advance on her credit card at an interest rate of 32%. a.$5.33 b.$32.00 c.$173.33 d.$205.33

A

Miles and Nick each separately apply for and receive loans worth $5,000 apiece. Miles has a very good credit score, so his loan has an APR of 7.75%, compounded monthly. Nick's credit score is rather low, so his loan has an APR of 13.10% interest, compounded monthly. If both of them repay their loans over a four year period, making equal monthly payments based on their own loan, how much more will Nick have paid than Miles? (Round all dollar values to the nearest cent.) a.$619.68 b.$267.50 c.$1,609.57 d.$1,070.00

A

Of the following statements, which one or ones describe actions harmful to your credit score? a.I and II b.II only c.I and III d.I only

A

Ralph is purchasing a new gaming system for $300.00. He is trying to decide whether he wants to use cash or his credit card to pay. He has $600.00 available in his checking account. a.Using cash can help Ralph improve his credit score. b.Using cash may limit overspending or impulse buying. c.Cash doesn't come with any potential "over limit" or "late payment" fees. d.Cash will be the easiest method of payment with very few security measures involved.

A

Roger has a credit card with an APR of 19.40% and a billing cycle of 30 days. The following table shows his transactions with that credit card in the month of June. If Roger's finance charge for June is $3.56, which method of calculating the finance charge does Roger's credit card company use? a.daily balance method b.adjusted balance method c.previous balance method d.there is not enough information to determine which method was used

A

Roger has a credit card with an APR of 19.40% and a billing cycle of 30 days. The following table shows his transactions with that credit card in the month of June. a.daily balance method b.adjusted balance method c.previous balance method d.there is not enough information to determine which method was used

A

Sophie did an anyonymous survey and collected her friends' credit scores. The scores she found are listed in the table below a.698 b.695 c.676 d.701

A

Sophie did an anyonymous survey and collected her friends' credit scores. The scores she found are listed in the table below. What is the mean credit score in this group? (Round to the nearest whole point, if applicable.) a.698 b.695 c.676 d.701

A

The following graph represents the cost and revenue functions for custom-made computers. How many computers have been sold at the break-even point? a.12 b.9 c.5 d.0

A

The following graph shows the relationship between cost and revenue for a manufacturer of radios. Which of the following pairs of equations best suits this graph? a.I and III b.I and IV c.II and III d.II and IV

A

Use the following compound interest formula to complete the problem. Currently you have two credit cards, H and I. Card H has a balance of $1,186.44 and an interest rate of 14.74%, compounded annually. Card I has a balance of $1,522.16 and an interest rate of 12.05%, compounded monthly. a.Card I's balance increased by $53.16 more than Card H's balance. b.Card I's balance increased by $13.45 more than Card H's balance. c.Card H's balance increased by $35.61 more than Card I's balance. d.Card H's balance increased by $49.06 more than Card I's balance.

A

What is the prime rate? a.The prime rate is the best interest rate that banks offer their most creditworthy customers. b.The prime rate is the interest rate on a credit card, unadjusted for interval compounding. c.The prime rate is the number which indicates your credit history. d.The prime rate is the highest interest rate allowed by law.

A

Which of the following types of credits would best describes home equity loans? a.closed and secured b.closed and unsecured c.open and secured d.open and unsecured

A

You are considering buying one of two brands of barbecue grills. Brand F costs $650 and will last for about fifteen years. Brand G costs $200 and will last for about five years, so you will need to buy three of them over the years to equal one Brand F grill. a.Brand G will end up costing $159.48 less than Brand F. b.Brand G will end up costing $50.00 less than Brand F. c.Brand F will end up costing $134.28 less than Brand G. d.Brand F will end up costing $91.08 less than Brand G.

A

Yvonne's credit card has an APR of 17.79% and a 30-day billing cycle. The following table details her credit card transactions in the month of June. a.The daily balance method will have a finance charge $0.21 greater than the previous balance method. b.The daily balance method will have a finance charge $0.53 greater than the previous balance method. c.The previous balance method will have a finance charge $0.45 greater than the daily balance method. d.The previous balance method will have a finance charge $0.40 greater than the daily balance method.

D

Which answer choice does not name one of the three national credit reporting agencies (also called credit bureaus)? a.Equifax b.Experian c.TransAtlantic d.TransUnion

c