Question 1

(TCO 3) Examples of _____ include automobile and installment loans for purchasing furniture or appliances.

 a line of credit

 a credit card loan

 open-end credit

 closed-end credit

 convenience credit

Question 2

(TCO 3) The maximum percentage of your net income that should be spent on credit purchases is recommended to be _____.

 10%

 20%

 30%

 40%

 50%

Question 3

(TCO 3) If your monthly net (after-tax) income is $2,200, what should be your maximum amount spent on credit payments?

 $150

 $220

 $440

 $500

 $660

Question 4

(TCO 3) Dividing monthly debt payments (not including house payments) by net monthly income will allow you to calculate your _____.

 net-worth-to-debt ratio

 debt-payments-to-income ratio

 liability status

 credit capacity status

 income-to-liability ratio

Question 5

(TCO 3) All of the following provide data to credit bureaus except

 banks.

 finance companies.

 merchants.

 court records.

 the Internal Revenue Service.

Question 6

(TCO 3) One of the five Cs that describes a borrower's attitude toward his or her credit obligations is called

 character.

 capital.

 capacity.

 collateral.

 conditions.

Question 7

(TCO 3) When a loan officer is examining your income and the amount of your existing debt payments in deciding whether to make a loan to you, which aspect of the five Cs of lending is the loan officer most likely looking at?

 Character

 Collateral

 Capital

 Capacity

 Conditions

Question 8

(TCO 3) When reviewing your credit file, if you find that there is information that is incorrect, then

 there are legal remedies available to you.

 you have no legal remedies.

 credit bureaus are not required to change it.

 you can't really do much about it.

 don't worry much, because you will still get the credit.

Question 9

(TCO 3) All of the following reasons are reasonable situations when you would decide to use credit except

 borrowing for a stay in a hospital because of appendicitis.

 borrowing to pay for your expensive dinner and movie every week.

 borrowing to buy a printer for your home office now because you know it will be twice as expensive in 2 years.

 borrowing to purchase a car so that you can go to work full time.

 using a credit card to purchase an airline ticket to visit a sick relative.

Question 10

(TCO 3) If Jack uses a Visa card to purchase a new digital camera, he would be using what type of credit?

 Installment sales credit

 Installment cash credit

 Single lump sum credit

 Revolving credit

 Incidental credit

Question 11

(TCO 3) As used in Chapter 7 of the text, float refers to

 an interest charged for only a few days.

 something one enjoys in a parade.

 a home equity loan.

 a period when no interest is charged.

 a lump-sum loan from a credit union.

Question 12

(TCO 3) Typically, a person can obtain the least expensive loan through

 parents or family members.

 banks.

 savings and loan associations.

 finance companies.

 loan sharks.

Question 13

(TCO 3) One source of the most expensive loans is through

 parents.

 finance companies.

 banks.

 friends.

 credit unions.

Question 14

(TCO 3) The following bankruptcy option allows a debtor with a regular income to extinguish his or her debts from future earnings over time.

 Chapter 7

 Chapter 11

 Chapter 13

 Chapter 15

 Chapter 3

Question 15

(TCO 3) Allison Smith starts the month with a balance of $1,100 on her credit card. On the 10th day of the month, she purchases $200 in clothes with her credit card. On the 15th day of the month, she makes a payment on her credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. Allison's interest rate is 1.5% for the month. Allison's bank calculates the finance charge on the credit card by using the adjusted balance method. What would Allison's finance charges be for the month?

 $7.50

 $9.00

 $11.25

 $13.25

 $16.50

Question 16

(TCO 3) Sarah Russell starts the month with a balance of $1,000 on her credit card. On the 10th day of the month, she purchases $200 in clothes with her credit card. On the 15th day of the month she makes a payment on her credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. Sarah's interest rate is 1.5% for the month. Sarah's bank calculates the finance charge on the credit card by using the average daily balance, excluding new purchases. What would Sarah's finance charges be for the month?

 $7.50

 $13.25

 $18.00

 $15.00

 $11.25

Question 17

(TCO 3) Shelly Sanders gets a loan for $3,000 and repays the loan in 12 monthly payments of $258 per month. Under the rule of 78s, what is the amount of interest included in her first payment?  

  $16.00

  $4.87

  $8.96

  $14.77

  $1.23

Question 18

(TCO 3) Steve has three children and has purchased each of them his or her own TV that is placed in his or her respective room. Which reason for indebtedness is this an example of?

 Misunderstanding or lack of communication

 Overindulgence of children

 The expectation of instant comfort

 Keeping up with the Joneses

 The use of money to punish

Question 19

(TCO 3) In terms of borrowing expenses, which of the following options would be relatively the cheapest?

 Car dealer

 Appliance store

 Department store

 Relative

 Finance company

Question 20

(TCO 3) If Tracy Sears borrows $1,250 for 1 year with an APR of 9% with no service fees, what is her total cost of credit?  

  $125

  $112.50

  $7.50

  $9.38

  $0