Personal Finance: chapter 5

A loan officer is examining whether or not he/she will offer you a loan today. Specifically, he/she is examining your income and debts. Which of the five Cs is the loan officer reviewing? a. Character b. Capacity c. Capital d. Collateral e. Conditions

b. Capacity

Molly purchased a home using a mortgage from Wells Fargo. She will make 360 equal payments over the next 30 years to pay for it. She is using a. Closed-end credit b. Open-end credit c. Revolving check credit d. A line of credit e. None of the above

a. Closed-end credit

Which of the following is an example of closed-end credit? a. Mortgage b. Department store credit card c. Overdraft protection d. Line of credit e. All of the above are examples of closed-end credit

a. Mortgage

Home equity loans a. Are based on the original purchase price of a home b. Have interest that is tax-deductible c. Do not have any security attached to the loan d. Have a 60 day grace period e. Are the most expensive loans available

b. Have interest that is tax-deductible

Which of the following is NOT a valid reason for borrowing? Select one or more: a. Purchasing a new dishwasher b. Paying for everyday living expenses c. Buying a car to start a new job d. Paying for a medical emergency e. All of the above are valid reasons for borrowing

b. Paying for everyday living expenses

A typical grace period for many credit card issuers is Select one or more: a. 0-10 days b. 10-20 days c. 20-25 days d. 30-40 days e. 45-60 days

c. 20-25

The periodic charge for the use of credit is a. Line of credit b. Revolving check credit c. Interest d. Grace period e. Principal

c. interest

Which of the following is NOT correct? Select one or more: a. Credit can result in a greater chance of bankruptcy. b. Credit can decrease the amount of money that will be available to spend in the future. c. Credit offers convenience when shopping on the Internet. d. Credit cards typically offer a "float" of up to 10 days. e. Credit allows a consumer to shop without carrying a large amount of cash.

d. Credit cards typically offer a "float" of up to 10 days.

Which of the following questions is NOT needed before deciding how and when to make a major purchase? Select one or more: a. Do I have the cash I need for the down payment? b. Does the purchase fit my budget? c. Could I postpone the purchase? d. Could I use the credit I need for this purchase in some better way? e. All of the above are valid questions to ask.

e. All of the above are valid questions to ask.

Failure to repay a loan may lead to all except: Select one or more: a. Bankruptcy b. Loss of income c. Loss of a good reputation d. Damage to family relationships e. All of the above may be a result of the failure to repay a loan

e. All of the above may be a result of the failure to repay a loan