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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 $245,000 and a current mortgage of $73,500 how much can she borrow in a home equity loan from Acme?

$122,500

Which of the following can result from failure to repay a loan?

1. bankruptcy 2. damage to family relationships 3. loss of income or valuable property 4. loss of a good reputation

Credit reports can be obtained for the following reasons

1. in response to a court order 2. in connection with credit transaction 3. for underwriting of insurance 4. for some legitimate business need

When calculating the debt-to-equity ratio, the following is included

1. installment debt 2. credit card balances 3. Net worth 4. Auto loan balances

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on

1. sex 2. age 3. nationality 4. race

The following statements are true about using credit

1. using credit can decrease the amount of money that will be available to spend in the future 2. using credit offers convenience when shopping on the Internet 3. using credit allows a consumer to shop w/o carrying a large amount of cash 4.using credit permits the purchase of goods even when funds are low

Before buying goods and services on credit, a consumer should consider all of the following

1. whether the benefits of purchasing now will outweigh the costs 2. whether purchasing now will increase efficiency 3. whether purchasing now will result in a more satisfying life 4. whether purchasing now will increase productivity

Which of the following is correct about using credit

1.occurs when you use water or electricity 2. is appropriate to pay for medical emergencies 3.usually makes returning merchandise without a receipt easier 4. allows consumers to enjoy goods and services now and pay later

Experts suggest that the debt payments-to-income ratio should be a maximum of

20%

A typical grace period offered by many credit card issuers is

20-25 days

What is the APR for a $450 loan when the loan is paid off in 12 equal monthly payments at the stated annual interest rate of 12.5%?

23.08% APR for monthly payment loan: r= (2 x n x 1) / P (N+1)

A direct loan for personal purposes, home improvements, or vacation expenses is called

An installment cash credit

Home equity loans should be used for

Major expenses such as home improvements or education

A loan that must be repaid in total on a specified day, usually within 30 to 90 days, is

Single lump-sum credit

Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?

VantageScore

A credit card holder who pays off his balances in full each month is known as

a convenience user

Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?

a debit card

Which of the following is NOT associated with credit cards?

a debit to your checking account

A prearranged loan for a specified amount that a consumer can use by writing a special check is known as

a revolving check credit

Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by

adding up basic monthly expenses and subtracting this total from take-home pay, plus figuring out what to give up to make the monthly loan payment

A loan officer is examining whether or not to offer you a loan today. Specifically, she is examining your income and debts. Which of the five Cs of credit is the loan officer reviewing?

capacity

The use of property or savings to secure a loan relates to

collateral

Consumer credit

dates back to colonial times

home equity loan

have interest that is tax-deductible

If you miss payments on a home equity loan, you can lose your

house

Credit reports can be obtained for all the following reasons expect

inquiry by a neighbor

The periodic charge for the use of credit is

interest

When calculating the debt-to-equity ratio, the following is NOT included

mortgage balance

Which of the following is often considered to offer the least expensive loans (loans with low interest)?

parents or family members

Which of the following is NOT a valid reason for borrowing money?

paying for everyday living expenses

a cash advance

requires you to pay interest every day until you repay the cash advance

A line of credit is

the maximum dollar amount of credit the lender has made available to a borrower

Bankruptcy courts treat gift cards

the same way they handle unsecured debt

Which of the following is the only online source authorized to provide you with a free copy of your credit report annually?

www.annualcreditreport.com

Which of the following is an exaple of open-end credit?

a department store credit card

which of the following is an example of closed-end credit

a mortgage loan

Perhaps the greatest disadvantage of using credit is

the temptation to overspend

Many people expect

their income to increase to make it easier to make payments on past credit purchases

Which of the following is NOT correct about using credit?

using credit can increase the amount of money that will be available to spend in the future

Which of the following is NOT correct?

using credit cards typically provides a "float" of up to 10 days

Installment credit, in which the debt is repaid in equal installments over specified period of time, exploded on the American scene with the advent of the

automobile

Timothy Carter went out to eat with his girlfriend at a fancy restaurant. When he tried to pay the bill with his Mastercard credit card, he was told that the restaurant accepted only cash or American Express. His waiter suggested that he use the ATM across the street to withdraw cash using his credit card. Tim did as suggested and didn't pay attention to any fees until he received his credit card statement one month later. He was shocked to see the total fees (3% cash advance), and his APR was increased to 20%. Given the cost of the meal ($165) plus the associated fees, how much did his meal cost him?

$172.70 Cash advance fee= cash advance percent interest x cost of meal Interest for one month = APR x (cost of meal) /12 months Total fees/interest cost for one month = cash advance fee + interest for one month Total cost= cost of meal + total fees/interest for one month

If Vince charged $240 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?

$240

If your monthly net (after-tax) income is $2,440, what should be your maximum amount spent on credit payments?

$488

If you borrow $480 at 5.5% simple annual interest and repay it in one lump sum at the end of one year, you will have to pay:

$506.40 total payment on loan=[ P + (P x r x T)]

Dave's take home pay per month is $3,300. What is the maximum dollar amount of debt payments he should have?

$660

Before buying goods and services on credit, a consumer should consider all of the following except

whether the good or service will be worth more because it was purchased with credit instead of cash

If you have probably reached the upper limit of debt obligations, your debt-to-equity ratio is about

1

The following questions need before deciding how and when to make a major purchase

1. Could I use the credit I need for this purchase in some better way? 2. Could I postpone the purchase? 3. Do I have the cash I need for the down payment? 4. Does the purchase fit my budget?

When misused, credit can result in

1. a less satisfying life 2. bankruptcy 3. loss of creditworthiness 4. default

All of the following is associated with credit cards

1. an annual fee 2. a finance charge 3. a grace period 4. convenience users and borrowers

Which of the following is a valid reason for using credit?

1.paying for medical emergency 2. purchasing an item that costs less now than it will later 3. borrowing for college education 4. purchasing a car so homemaker can return to work

Information about a personal bankruptcy may be reported in your credit file for

10 years

The question "what are your assets and net worth?" relates to

captial

The question "will you repay the loan?" relates to

character

Molly purchased a $1,500 dishwasher from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using

closed-end credit