Finances Ch. 5
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
Have interest that is tax-deductible.
Home equity loans
Major expenses such as home improvements or education.
Home equity loans should be used for
$240
If Vince charged $240 on his credit with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?
$506.40
If you borrow $480 at 5.5 percent simple annual interest and repay it in one lump sum at the end of the year, you will have to pay:
1
If you have probably reached the upper limit of debt obligations, your debt-to-equity ratio is about
House
If you miss payments on a home equity loan, you can lose your
$488.00
If your monthly net(after-tax) income is $2,400, what should be your maximum amount spent on credit payments?
automobile
Installment credit, in which the debt is repaid in equal installments over a specified period of time, exploded on the American scene with the advent of
their incomes to increase to make it easier to make payments on past credit purchases
Many people expect
Closed-end credit
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.
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
23.08%
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 percent?
Mortgage balance
When calculating the debt-to-equity ratio, the following is NOT included:
loss of creditworthiness
When misused, credit can result in
A. Bankruptcy. B. Loss of income. C. Loss of a good reputation. D. Damage to family relationships. E. All of these answers may be a result of the failure to repay a loan.
Which of the following can result from a failure to repay a loan?
A debit card
Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
paying for everyday living expenses
Which of the following is NOT a valid reason for borrowing?
an annual fee
Which of the following is NOT associated with credit cards?
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
Which of the following is NOT correct?
A)Purchasing a car so a homemaker can return to work B)Borrowing for a college education C)Purchasing an item that costs less now than it will later D)Paying for a medical emergency **E)All of these are valid reasons for borrowing
Which of the following is a valid reason for using credit?
A mortgage loan.
Which of the following is an example of closed-end credit?
A department store credit card
Which of the following is an example of open-end credit?
Parents or family members.
Which of the following is often considered to offer the least expensive loans?
VantageScore
Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?
All of these are valid questions to ask.
Which of the following questions is NOT needed before deciding how and when to make a major purchase?
a revolving check credit
a prearranged loan from a bank for a specified amount that you can use by writing a special check; bank line of credit
the temptation to overspend
perhaps the greatest disadvantage of using credit is
a line of credit
the periodic charge for the use of credit is called
collateral
the use of property or savings to secure a loan relates to
requires you to pay interest every day until you repay the cash advance
A cash advance
a convenience user
A credit card holder who pays off his balances in full each month is known as
an installment cash credit
A direct loan for personal purposes, home improvements, or vacation expenses is called
the maximum dollar amount of credit the lender has made available to a borrower
A line of credit is
capacity
A loan officer is examining whether or not to will offer you a loan today. Specifically, she is examining your income and debts. Which of the five Cs is the loan officer reviewing?
Single lump-sum credit.
A loan that must be repaid in total on a specified day, usually within 30 to 90 days, is
20-25 days.
A typical grace period for many credit card issuers is
$122,500
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?
The same way they handle unsecured debt.
Bankruptcy courts treat gift cards
Whether the good or service will be worth more because it was purchased with credit instead of cash.
Before buying goods and services on credit, a consumer should consider all of the following except
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.
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
dates back to colonial times
Consumer credit
$660
Dave's take home pay per month is $3,300. What is the max. dollar amount of debt payments he should have?
20%
Experts suggest that the debt payments-to-income ratio should be a maximum of
race
The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on
collateral
The question "What are your assets and net worth?" relates to
character
The question "Will you repay the loan?" relates to