personal finance ch 6 & 7

Although credit allows more immediate satisfactory of needs and desires, it does not increase total purchasing power. False True

TRUE

If you borrow $100 at 10 percent simple annual interest and repay it in one lump sum at the end of one year, you will have to pay: a.) $110. b.) $100. c.) $115. d.) $105. e.) $120.

a.) $110.

Henry Garrison starts the month with a balance on his credit card of $1000. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month makes a payment on his credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. Henry's interest rate is one and a half percent for the month. Henry's bank calculates the finance charge on their credit card by using the average daily balance including new purchases. What would Henry's finance charges be for the month? a.) $13.25 b.) $15.00 c.) $18.00 d.) $11.25 e.) $7.50

a.) $13.25

If you receive a phone call from a debt collector, he/she must send you a written notice within ____________ days. Correct! a.) 5 b.) 10 c.) 20 d.) 30 e.) 15

a.) 5

Which bankruptcy allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time? a.) Chapter 13 b.) Chapter 7 c.) Chapter 15 d.) Chapter 11

a.) Chapter 13

Which federal law limits a cardholder's liability for unauthorized use of a card to $50? a.) Truth in Lending Act b.) Fair Credit Reporting Act c.) Fair Debt Collection Practices Act d.) Fair Credit Billing Act e.) Equal Credit Opportunity Act

a.) Truth in Lending Act

Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of: a.) closed-end credit. b.) a line of credit. c.) open-end credit. d.) a credit card loan. e.) convenience credit.

a.) closed-end credit.

A valuable asset pledged to assure loan payments and subject to seizure upon default is called: a.) collateral. b.) character. c.) conditions. d.) capital. e.) capacity

a.) collateral.

Most of the information in your credit file may be reported for only ______ years. a.) 15 b.) 7 c.) 11 d.) 9 e.) 13

b.) 7

Which federal law requires credit-reporting agencies to send the consumer's version of a disputed item to certain businesses and creditors? a.) Fair Credit Billing Act b.) Fair Credit Reporting Act c.) Truth in Lending Act d.) Equal Credit Opportunity Act e.) Fair Debt Collection Practices Act

b.) Fair Credit Reporting Act

Float, as used in Chapter 7, refers to: a.) a lump-sum loan from a credit union. b.) a period when no interest is charged. c.) something one enjoys in a parade. d.) a home equity loan. e.) an interest charged for only a few days.

b.) a period when no interest is charged.

If you are denied credit, your first step should be to: a.) hire an attorney and file a suit against the creditor. b.) check your credit file at the consumer bureau. c.) increase your income and decrease your spending. d.) reapply for credit. e.) sue the credit bureau that provided the negative information.

b.) check your credit file at the consumer bureau.

The debit card: a.) is really like a travel and entertainment card. b.) debits your account at the moment you buy goods or services. c.) is a new type of a credit card issued by VISA International. d.) is declared illegal in many states. e.) credits your account at the moment you buy goods or services.

b.) debits your account at the moment you buy goods or services.

Another name for closed-end credit is: a.) revolving credit. b.) installment credit. c.) convenience credit. d.) bank card credit. e.) a line of credit.

b.) installment credit.

Another name for open-end credit is: a.) convenience credit. b.) revolving credit. c.) a single lump-sum credit. d.) a box of credit. e.) installment credit.

b.) revolving credit.

Shelley Stumbaugh gets a loan for $3000 with an annual interest rate of 6%. Shelly repays the loan in 12 monthly payments of $258 per month. The total amount of interest she pays is $96. Under the rule of 78's, what is the amount of interest included in her last payment? a.) $16.00 b.) $8.00 c.) $1.23 d.) None of the above e.) $14.77

c.) $1.23

Karen Price has determined that her net worth is $30,000. She has also determined that the face value of her mortgage is $80,000. She has determined that the face value of the rest of her debt is $15,000. What is Karen's debt to equity ratio? a.) None of the above b.) 2.67 c.) .5 d.) 3.27 e.) 2.

c.) .5

Which of the following is a credit bureau? a.) The Federal Trade Commission b.) None of the above are credit bureaus c.) Experian d.) Better Business Bureau e.) The Federal Reserve

c.) Experian

Gary Simpson notices that his neighbor has a brand new Ford F150 truck parked in the driveway. Gary decides that he needs a new car and goes out and purchases a Hummer with a six year loan on it. Which reason for indebtedness is this an example of? a.) The expectation of instant comfort b.) Misunderstanding or lack of communication c.) Keeping up with the Joneses d.) Overindulgence of children e.) The use of money to punish

c.) Keeping up with the Joneses

A good example of a closed-end credit is: a.) using a cashier's check to pay for a purchase. b.) a credit card issued by VISA or MasterCard. c.) a mortgage loan. d.) using overdraft protection at a bank. e.) a credit card issued by a department store.

c.) a mortgage loan.

Debt-to-equity ratio is: a.) calculated by dividing monthly debt payments by net monthly income. b.) rarely used by creditors in determining credit worthiness. c.) calculated by dividing total liabilities by net worth. d.) determined by dividing your assets by liabilities. e.) a useless ratio for determining your credit capacity.

c.) calculated by dividing total liabilities by net worth.

A term that refers to the borrower's assets or net worth is called: a.) collateral. b.) conditions. c.) capital. d.) capacity. e.) character.

c.) capital.

The total dollar amount you pay to use credit is called the: a.) price of the good/service purchased. b.) amortized rebate. c.) finance charge. d.) annual percentage rate.

c.) finance charge.

Which federal law, passed in 1969, requires creditors to state the cost of borrowing in common language? a.) Fair Debt Collection Practices Act b.) Fair Credit Billing Act c.) Fair Credit Reporting Act d.) Truth in Lending Act e.) Equal Credit Opportunity Act

d.) Truth in Lending Act

In a Chapter 7 bankruptcy, a debtor: a.) does not have to repay educational loans. b.) is called a "bankrupt." c.) is absolved of alimony and child support payments. d.) is required to draw up a petition listing all assets and liabilities. e.) does not have to pay a filing fee.

d.) is required to draw up a petition listing all assets and liabilities.

Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file? a.) the Fair Credit Billing Act of 1975 b.) the Fair Debit Collection Practices Act of 1978 c.) the Equal Credit Opportunity Act of 1975 d.) the Fair Credit Reporting Act of 1971 e.) the Truth in Lending Act of 1969

d.) the Fair Credit Reporting Act of 1971

If you cosign a loan: a.) the creditor cannot garnish your wages. b.) it is not your legal responsibility to pay the debt. c.) the creditor must first try to collect from the borrower d.) you'll have to pay up to the full amount of the debt if the borrower does not pay. e.) you are not being asked to guarantee the debt.

d.) you'll have to pay up to the full amount of the debt if the borrower does not pay.

If your credit application is denied, you: a.) can file a complaint against the merchant. b.) can sue the credit rating agency. c.) can reapply for credit after 30 days. d.) don't have any rights provided by law. e.) are entitled to know the specific reason you were denied credit.

e.) are entitled to know the specific reason you were denied credit.

If you default on your automobile loan: a.) the creditor pays the towing and storage costs. b.) the federal consumer credit laws give you protection. c.) you don't have to pay the full balance due on the loan. d.) an advance notice to you is required before your car is repossessed. e.) no advance notice is required before repossession.

e.) no advance notice is required before repossession.

A good example of an open-end credit is: a.) installment loan from a furniture store. b.) the mortgage loan from a savings and loan institution. c.) automobile loan from a credit union. d.) installment loan for purchasing a major appliance. e.) the use of a bank credit card to make a purchase.

e.) the use of a bank credit card to make a purchase.