Personal Finance: Chapter 5 Quiz

eight

Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a debtor seeking to erase all debts will have to wait ___ year(s) from her last bankruptcy before she can file again. one three seven eight ten

$88.00

Fredrick received a $1,100 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 4 percent loan. What is his total interest? $40.00 $8.00 $44.00 $1,108.00 $88.00

Major expenses, such as home improvements or education.

Home equity loans should be used for: Buying dinner at a restaurant. Borrowing money for impulse purchases. Major expenses, such as home improvements or education. Getting cash for weekend entertainment. Selling a car.

You are entitled to a free copy of your credit report.

If you are denied credit, then: You have a legal right to sue the credit bureau. Your parent can purchase a copy of your credit report. You have a legal right to sue the company that denied you credit. The denial will remain in your credit file for 10 years. You are entitled to a free copy of your credit report.

false

In the five Cs of credit, capacity refers to the borrower's trustworthiness and stability. True False

True

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

$27

Paul borrowed $220 to be repaid in one year. He paid 10 percent interest and a service charge of $5. What is his finance charge? $27 $220 $22 $247 $5

19%

Rachel Johnson has net monthly income of $2,500. She has a monthly auto loan payment of $275, a student loan payment of $150, and a credit card minimum payment of $50. What is her debt payments-to-income ratio? 8% 13% 17% 19% 20%

All of these are prohibited.

The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on: Race. Nationality. Age. Sex. All of these are prohibited.

The smallest amount you can pay and remain a borrower in good standing.

The minimum monthly payment on a credit card is: The amount to be paid without paying interest. The interest amount charged for the month. The minimum to be paid to avoid any charges or fees. The smallest amount you can pay and remain a borrower in good standing. The amount needed to pay off the credit card in one year.

Mortgage balance

When calculating the debt-to-equity ratio, which of the following is NOT included? Credit card balances Net worth Auto loan balances Mortgage balance Installment debt

All the choices are correct.

When misused, credit can result in: Default.Bankruptcy. Loss of creditworthiness. A less satisfying life. All the choices are correct.

All of these are valid reasons for borrowing.

Which of the following is a valid reason for using credit? Purchasing a car so a homemaker can return to work Borrowing for a college education Purchasing an item that costs less now than it will later Paying for a medical emergency All of these are valid reasons for borrowing.

A mortgage loan

Which of the following is an example of closed-end credit? A mortgage loan A department store credit card Overdraft protection Travel and entertainment cards All of these are examples of closed-end credit.

www.annualcreditreport.com

Which of the following is the only online source authorized to provide you with a free copy of your credit report annually? www.annualcreditscore.com www.freecreditreport.com www.onlinecreditreport.com www.freecreditscore.com www.annualcreditreport.com

Papers with personal information

Which of the following items should be shredded to protect yourself from identity theft? Magazines Papers with personal information Envelopes Campaign mail Newspaper ads

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

A line of credit is: The equal payments required for one-time loans. The loan amount for installment cash credit. The maximum loan amount for closed-end credit. The maximum dollar amount of credit the lender has made available to a borrower. The monthly payment required for single lump-sum credit.

20-25 days.

A typical grace period offered by many credit card issuers is: 0-10 days. 10-20 days. 20-25 days. 30-40 days. 45-60 days.

$135,000

Acme Home Lending offers home equity loans up to 75 percent of the home value for its customers. If Sally Johnson has a home valued at $300,000 and a current mortgage of $90,000, how much can she borrow in a home equity loan from Acme? $135,000 $90,000 $225,000 $112,500 $210,000

False

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