BA 281 - Ch. 5 Reading Quiz

Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power. True False

False

Credit can indicate stability since lenders consider you a good risk. True False

True

Economists recognize consumer credit as a major force in the American economy. True False

True

Most information in your credit file (except bankruptcies) may be reported for only 7 years. True False

True

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

True

The longer the term for a loan at a given interest rate, the greater the amount you must pay in interest charges. True False

True

Under Chapter 7 of the U.S. bankruptcy code, a. Certain debts arising from educational loans are released. b. Alimony and child support debts are released. c. All debts are forgiven. d. Certain assets receive some protection. e. Debt arising from driving while intoxicated is forgiven.

d. Certain assets receive some protection.

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

d. Race or nationality.

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 a. Will be lower than the stated rate. b. Will be the same as the stated rate. c. Will be unrelated to the stated rate. d. Will be higher than the stated rate. e. Cannot be determined without knowing the length of the loan period.

d. Will be higher than the stated rate.

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme? a. $50,000 b. $80,000 c. $160,000 d. $150,000 e. $110,000

e. $110,000 Maximum home equity loan = Home value × 80% − Mortgage balance = $200,000 × 80% − $50,000 = $110,000.