Question 1

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.

Accepted Answer

A)  interim 
B)  single-payment 
C)  installment 
D)  standard 
E)  consolidated 
A)  interim 
B)  single-payment 
C)  installment 
D)  standard 
E)  consolidated

Question 2

Most single-payment loans are secured by:

Accepted Answer

A)  collateral. 
B)  security claims. 
C)  rollover loans. 
D)  finance charges. 
E)  liens. 
A)  collateral. 
B)  security claims. 
C)  rollover loans. 
D)  finance charges. 
E)  liens.

Question 3

Rebates are often more cost-effective than the 0% annual percentage rate (APR) loans offered on automobile loans.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding loan maturity is true?

Accepted Answer

A)  The longer the loan maturity, the higher the amount of interest paid. 
B)  The shorter the loan maturity, the higher the total cost of borrowing. 
C)  The longer the loan maturity, the higher the monthly payments. 
D)  The shorter the loan maturity, the lower the monthly payments. 
E)  The longer the loan maturity, the lower the total cost of borrowing. 
A)  The longer the loan maturity, the higher the amount of interest paid. 
B)  The shorter the loan maturity, the higher the total cost of borrowing. 
C)  The longer the loan maturity, the higher the monthly payments. 
D)  The shorter the loan maturity, the lower the monthly payments. 
E)  The longer the loan maturity, the lower the total cost of borrowing.

Question 5

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. 
The chief danger in life insurance loans is that they have [ short maturity dates | high interest rates ].

Accepted Answer

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

Question 6

Ideally, you should take inventory of the consumer debt you have outstanding once a year.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

Accepted Answer

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

Question 8

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 taking inventory of your consumer debt, [ include | do not include ] your home mortgage.

Accepted Answer

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

Question 9

The cash value of some types of life insurance policies can be used as collateral for loans.

Accepted Answer

A) True 
 B)False

Question 10

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

Accepted Answer

A)  add-on method. 
B)  double-declining-balance method. 
C)  discount method. 
D)  simple interest method. 
E)  past-due balance method. 
A)  add-on method. 
B)  double-declining-balance method. 
C)  discount method. 
D)  simple interest method. 
E)  past-due balance method.

Question 11

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

Accepted Answer

A)  nominal-rate 
B)  standard-rate 
C)  variable-rate 
D)  fixed-rate 
E)  low-rate 
A)  nominal-rate 
B)  standard-rate 
C)  variable-rate 
D)  fixed-rate 
E)  low-rate

Question 12

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 are borrowing $5,000 at an interest rate of 9%. You may choose a 24- or 36-month repayment plan. The total finance cost will be higher with the [ 24-month | 36-month ] plan.

Accepted Answer

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

Question 13

A single-payment loan is advantageous to a borrower only if:

Accepted Answer

A)  the interest rate is more than that on an installment loan offered by commercial banks. 
B)  funds are expected to be available in the future to repay the loan in a lump sum. 
C)  the finance charges are calculated using the discount method. 
D)  the finance charges are calculated using the simple interest method. 
E)  it has a collateral note. 
A)  the interest rate is more than that on an installment loan offered by commercial banks. 
B)  funds are expected to be available in the future to repay the loan in a lump sum. 
C)  the finance charges are calculated using the discount method. 
D)  the finance charges are calculated using the simple interest method. 
E)  it has a collateral note.

Question 14

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. 
The interest paid on a student loan [ is sometimes | is not ] tax deductible.

Accepted Answer

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

Question 15

The most common use of consumer loans is to finance:

Accepted Answer

A)  a new car. 
B)  college education. 
C)  a vacation. 
D)  a house. 
E)  furniture. 
A)  a new car. 
B)  college education. 
C)  a vacation. 
D)  a house. 
E)  furniture.

Question 16

A legal claim that allows creditors to liquidate loan collateral is a:

Accepted Answer

A)  loan application. 
B)  note. 
C)  security claim. 
D)  lien. 
E)  loan rollover. 
A)  loan application. 
B)  note. 
C)  security claim. 
D)  lien. 
E)  loan rollover.

Question 17

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan.

Accepted Answer

A) True 
 B)False

Question 18

Consumer loans, like open account credit, result from a rather informal process.

Accepted Answer

A) True 
 B)False

Question 19

It is better to use your savings instead of borrowing to make a purchase when:

Accepted Answer

A)  you have adequate savings. 
B)  interest rates are rising. 
C)  interest rates are falling. 
D)  the cost of borrowing is much greater than the interest earned on savings. 
E)  the interest earned on savings is greater than the interest paid on the loan. 
A)  you have adequate savings. 
B)  interest rates are rising. 
C)  interest rates are falling. 
D)  the cost of borrowing is much greater than the interest earned on savings. 
E)  the interest earned on savings is greater than the interest paid on the loan.

Question 20

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

Accepted Answer

A)  annual percentage rate (APR) 
B)  balance due 
C)  prepayment penalty 
D)  basic cost of money 
E)  amount saved 
A)  annual percentage rate (APR) 
B)  balance due 
C)  prepayment penalty 
D)  basic cost of money 
E)  amount saved

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.

Most single-payment loans are secured by:

Rebates are often more cost-effective than the 0% annual percentage rate (APR) loans offered on automobile loans.

Which of the following statements regarding loan maturity is true?

Ideally, you should take inventory of the consumer debt you have outstanding once a year.

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

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 taking inventory of your consumer debt, [ include | do not include ] your home mortgage.

The cash value of some types of life insurance policies can be used as collateral for loans.

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

A single-payment loan is advantageous to a borrower only if:

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. The interest paid on a student loan [ is sometimes | is not ] tax deductible.

The most common use of consumer loans is to finance:

A legal claim that allows creditors to liquidate loan collateral is a:

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan.

Consumer loans, like open account credit, result from a rather informal process.

It is better to use your savings instead of borrowing to make a purchase when:

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

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

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.

Most single-payment loans are secured by:

Rebates are often more cost-effective than the 0% annual percentage rate (APR) loans offered on automobile loans.

Which of the following statements regarding loan maturity is true?

Ideally, you should take inventory of the consumer debt you have outstanding once a year.

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

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 taking inventory of your consumer debt, [ include | do not include ] your home mortgage.

The cash value of some types of life insurance policies can be used as collateral for loans.

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

A single-payment loan is advantageous to a borrower only if:

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. The interest paid on a student loan [ is sometimes | is not ] tax deductible.

The most common use of consumer loans is to finance:

A legal claim that allows creditors to liquidate loan collateral is a:

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan.

Consumer loans, like open account credit, result from a rather informal process.

It is better to use your savings instead of borrowing to make a purchase when:

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

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