Question 1

The annual percentage rate (APR) is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

Accepted Answer

A)  dollar cost of credit method 
B)  discount method 
C)  average loan balance method 
D)  double-declining-balance method 
E)  simple interest method 
A)  dollar cost of credit method 
B)  discount method 
C)  average loan balance method 
D)  double-declining-balance method 
E)  simple interest method

Question 2

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Accepted Answer

A)  a liability 
B)  collateral 
C)  debt 
D)  insurance 
E)  corporate deposit 
A)  a liability 
B)  collateral 
C)  debt 
D)  insurance 
E)  corporate deposit

Question 3

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
When simple interest is used with installment loans, interest is charged on the [ original  | outstanding ] balance of the loan.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 4

Jamie is going to buy furniture with a single-payment loan that is discounted. The loan will be for $5,000 for 2 years at 10% interest. Calculate the annual percentage rate (APR) on this loan. (Show all work.)

Accepted Answer

Finance Charge = $5,000 × 0.10

Question 5

Most consumer loans are made at fixed rates of interest.

Accepted Answer

A) True 
 B)False

Question 6

_____ obtain funds from their stockholders and through open market borrowing.

Accepted Answer

A)  Credit unions 
B)  Consumer finance companies 
C)  Commercial banks 
D)  Life insurance companies 
E)  Savings and loan associations (S&Ls) 
A)  Credit unions 
B)  Consumer finance companies 
C)  Commercial banks 
D)  Life insurance companies 
E)  Savings and loan associations (S&Ls)

Question 7

You are borrowing $5,000 at a 9% interest rate. The total finance cost will be the highest in a:

Accepted Answer

A)  24-month repayment plan. 
B)  36-month repayment plan. 
C)  12-month repayment plan. 
D)  48-month repayment plan. 
E)  3-month repayment plan. 
A)  24-month repayment plan. 
B)  36-month repayment plan. 
C)  12-month repayment plan. 
D)  48-month repayment plan. 
E)  3-month repayment plan.

Question 8

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be:

Accepted Answer

A)  repaid is $2,200. 
B)  paid to the borrower is $2,049.20. 
C)  repaid is $2,350.80. 
D)  paid to the borrower is $2,350.80. 
E)  paid to the borrower is $150.80. 
A)  repaid is $2,200. 
B)  paid to the borrower is $2,049.20. 
C)  repaid is $2,350.80. 
D)  paid to the borrower is $2,350.80. 
E)  paid to the borrower is $150.80.

Question 9

Consumer finance companies:

Accepted Answer

A)  charge rates that are regulated by the states where they do business. 
B)  are cooperative financial institutions that are owned by their members. 
C)  are nonprofit financial institutions. 
D)  accept deposits from their members and use the deposits for lending. 
E)  are managed by large manufacturing companies. 
A)  charge rates that are regulated by the states where they do business. 
B)  are cooperative financial institutions that are owned by their members. 
C)  are nonprofit financial institutions. 
D)  accept deposits from their members and use the deposits for lending. 
E)  are managed by large manufacturing companies.

Question 10

The _____ uses a special tax-sheltered savings and investment program rather than borrowing money to pay for college.

Accepted Answer

A)  529 college savings plan 
B)  Wage Earner Plan 
C)  Perkins loan 
D)  Parent Loan for Undergraduate Students (PLUS) 
E)  William D. Ford Federal Direct Loan Program 
A)  529 college savings plan 
B)  Wage Earner Plan 
C)  Perkins loan 
D)  Parent Loan for Undergraduate Students (PLUS) 
E)  William D. Ford Federal Direct Loan Program

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
Consolidation loans are generally [ inexpensive | expensive ].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 12

Which of the following statements regarding fixed-rate loans is true?

Accepted Answer

A)  Fixed-rate loans are preferable if interest rates are expected to rise. 
B)  The cost of fixed-rate loans increases with an increase in the market interest rate. 
C)  The cost of fixed-rate loans decreases with a decrease in the market interest rate. 
D)  Fixed-rate loans are preferable if interest rates are expected to fall. 
E)  Fixed-rate loans have periodic adjustment dates, at which time the interest rate and monthly payment are adjusted as necessary. 
A)  Fixed-rate loans are preferable if interest rates are expected to rise. 
B)  The cost of fixed-rate loans increases with an increase in the market interest rate. 
C)  The cost of fixed-rate loans decreases with a decrease in the market interest rate. 
D)  Fixed-rate loans are preferable if interest rates are expected to fall. 
E)  Fixed-rate loans have periodic adjustment dates, at which time the interest rate and monthly payment are adjusted as necessary.

Question 13

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

Accepted Answer

A) True 
 B)False

Question 14

It is legal for a lender to charge a prepayment penalty.

Accepted Answer

A) True 
 B)False

Question 15

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
You must be a member of a [ credit union | savings and loan association (S&L) ] in order to borrow money there.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 16

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
A finance company uses the discount method of calculating interest. The loan principal is $5,000, the interest rate is 10%, and repayment is expected in two years. You will receive [ $5,000 | $4,000 ] from the lender.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 17

The _____ is commonly used on revolving credit lines by commercial banks, savings and loan associations (S&Ls), and credit unions.

Accepted Answer

A)  simple interest method 
B)  add-on method 
C)  discount method 
D)  sum-of-the-digits method 
E)  average loan balance method 
A)  simple interest method 
B)  add-on method 
C)  discount method 
D)  sum-of-the-digits method 
E)  average loan balance method

Question 18

_____ loans do not have to be repaid until after you graduate from college.

Accepted Answer

A)  Direct and Perkins 
B)  Direct and Parent Loans for Undergraduate Students (PLUS) 
C)  Perkins and Parent Loans for Undergraduate Students (PLUS) 
D)  Only Direct 
E)  Only Perkins 
A)  Direct and Perkins 
B)  Direct and Parent Loans for Undergraduate Students (PLUS) 
C)  Perkins and Parent Loans for Undergraduate Students (PLUS) 
D)  Only Direct 
E)  Only Perkins

Question 19

Calculating interest using the _____ will result in the highest annual percentage rate (APR) on a single-payment loan.

Accepted Answer

A)  double-declining-balance method 
B)  discount method 
C)  average loan balance method 
D)  simple interest method 
E)  add-on method 
A)  double-declining-balance method 
B)  discount method 
C)  average loan balance method 
D)  simple interest method 
E)  add-on method

Question 20

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
A [ sales finance company | consumer finance company ] purchases notes drawn up by sellers of big-ticket items.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

The annual percentage rate (APR) is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Jamie is going to buy furniture with a single-payment loan that is discounted. The loan will be for $5,000 for 2 years at 10% interest. Calculate the annual percentage rate (APR) on this loan. (Show all work.)

Most consumer loans are made at fixed rates of interest.

_____ obtain funds from their stockholders and through open market borrowing.

You are borrowing $5,000 at a 9% interest rate. The total finance cost will be the highest in a:

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be:

Consumer finance companies:

The _____ uses a special tax-sheltered savings and investment program rather than borrowing money to pay for college.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Consolidation loans are generally [ inexpensive | expensive ].

Which of the following statements regarding fixed-rate loans is true?

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

It is legal for a lender to charge a prepayment penalty.

The _____ is commonly used on revolving credit lines by commercial banks, savings and loan associations (S&Ls), and credit unions.

_____ loans do not have to be repaid until after you graduate from college.

Calculating interest using the _____ will result in the highest annual percentage rate (APR) on a single-payment loan.

Understanding the Financial Planning Process

Developing Your Financial Statements and Plans

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 7: Using Consumer Loans

The annual percentage rate (APR) is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Jamie is going to buy furniture with a single-payment loan that is discounted. The loan will be for $5,000 for 2 years at 10% interest. Calculate the annual percentage rate (APR) on this loan. (Show all work.)

Most consumer loans are made at fixed rates of interest.

_____ obtain funds from their stockholders and through open market borrowing.

You are borrowing $5,000 at a 9% interest rate. The total finance cost will be the highest in a:

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be:

Consumer finance companies:

The _____ uses a special tax-sheltered savings and investment program rather than borrowing money to pay for college.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Consolidation loans are generally [ inexpensive | expensive ].

Which of the following statements regarding fixed-rate loans is true?

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

It is legal for a lender to charge a prepayment penalty.

The _____ is commonly used on revolving credit lines by commercial banks, savings and loan associations (S&Ls), and credit unions.

_____ loans do not have to be repaid until after you graduate from college.

Calculating interest using the _____ will result in the highest annual percentage rate (APR) on a single-payment loan.

Understanding the Financial Planning Process

Developing Your Financial Statements and Plans

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds and Real Estate

Planning for Retirement

Preserving Your Estate

Filters