Question 1

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of _____.

Accepted Answer

A) collateral security 
B) interim financing 
C) cumulative borrowing 
D) loan rollover 
E) loan extension 
A) collateral security 
B) interim financing 
C) cumulative borrowing 
D) loan rollover 
E) loan extension

Question 2

Commercial banks are able to charge lower interest rates than other lending institutions because:

Accepted Answer

A) they make shorter term loans. 
B) they usually take only the best credit risks. 
C) their depositors require higher rates. 
D) they get their funds from the money market. 
E) they make only secured loans. 
A) they make shorter term loans. 
B) they usually take only the best credit risks. 
C) their depositors require higher rates. 
D) they get their funds from the money market. 
E) they make only secured loans.

Question 3

A(n)_____ loan is a loan that 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 4

Jamil is purchasing a new truck for $30,000.He is making a $2,000 down payment and will be making 60 monthly payments of $541 each.What are the total finance charges on this loan?

Accepted Answer

Loan amount = $28,000 ($30,000

Question 5

Calculating interest using the ____________ will result in the highest 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 
A) double declining balance method 
B) discount method 
C) average loan balance method 
D) simple interest method

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to use your savings to make a purchase.

Accepted Answer

A) True 
 B)False

Question 8

To qualify for a subsidized Stafford loan,you must:

Accepted Answer

A) own a few financial assets to repay the loan. 
B) make satisfactory academic progress. 
C) have parents who are graduates. 
D) have parents who are capable of repaying the loan. 
E) be in default on any other student loans. 
A) own a few financial assets to repay the loan. 
B) make satisfactory academic progress. 
C) have parents who are graduates. 
D) have parents who are capable of repaying the loan. 
E) be in default on any other student loans.

Question 9

When comparing two installment loans with the same principal and annual percentage rate (APR),the loan with ____________. ​

Accepted Answer

A) the longer maturity will have the lower monthly payment and the higher total costs 
B) the shorter maturity will have the lower monthly payment and the higher total costs 
C) the longer maturity will have the higher monthly payment and the higher total costs 
D) the shorter maturity will have the lower monthly payment and the lower total costs 
A) the longer maturity will have the lower monthly payment and the higher total costs 
B) the shorter maturity will have the lower monthly payment and the higher total costs 
C) the longer maturity will have the higher monthly payment and the higher total costs 
D) the shorter maturity will have the lower monthly payment and the lower total costs

Question 10

Which of the following is true of loan collateral?

Accepted Answer

A) Loans secured by collateral always have higher finance charges than unsecured loans. 
B) Collateral is an item of value used to secure the principal portion of a loan. 
C) Collateral is always required by banks to lend to customers with good credit ratings. 
D) Collateral is an item of value used to secure the interest portion of a loan. 
E) Loans are secured by collateral that is readily marketable at a price high enough to cover the interest portion of the loan. 
A) Loans secured by collateral always have higher finance charges than unsecured loans. 
B) Collateral is an item of value used to secure the principal portion of a loan. 
C) Collateral is always required by banks to lend to customers with good credit ratings. 
D) Collateral is an item of value used to secure the interest portion of a loan. 
E) Loans are secured by collateral that is readily marketable at a price high enough to cover the interest portion of the loan.

Question 11

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 12

Which of the following is a feature of a home equity loan?

Accepted Answer

A) The interest rate on a home equity loan is higher than that on other loans. 
B) The interest paid on a home equity loan is tax deductible. 
C) A home equity loan is generally the first mortgage loan. 
D) A home equity loan is a single-payment loan. 
E) A home equity loan is an unsecured loan. 
A) The interest rate on a home equity loan is higher than that on other loans. 
B) The interest paid on a home equity loan is tax deductible. 
C) A home equity loan is generally the first mortgage loan. 
D) A home equity loan is a single-payment loan. 
E) A home equity loan is an unsecured loan.

Question 13

The cash value of a wholelife insurance policy can be used as a source of loan collateral.

Accepted Answer

A) True 
 B)False

Question 14

When loaning money to a friend or family member,it is advisable to lend only an amount that you can afford to give away.

Accepted Answer

A) True 
 B)False

Question 15

When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to borrow to make a purchase.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is recommended if you loan money to a friend or relative?

Accepted Answer

A) Charge interest at a rate comparable to any high-risk security. 
B) Always consider offering cash as a gift instead of extending a loan. 
C) Put the agreement in writing. 
D) Ensure that the loan is due within one year or less. 
E) Make informal transactions for friends and relatives. 
A) Charge interest at a rate comparable to any high-risk security. 
B) Always consider offering cash as a gift instead of extending a loan. 
C) Put the agreement in writing. 
D) Ensure that the loan is due within one year or less. 
E) Make informal transactions for friends and relatives.

Question 17

When the simple interest method is used to determine finance charges,the interest is calculated based on the:

Accepted Answer

A) future value of the installments. 
B) average outstanding balance. 
C) actual balance of the loan. 
D) present value of all finance charges. 
E) future value of all finance charges. 
A) future value of the installments. 
B) average outstanding balance. 
C) actual balance of the loan. 
D) present value of all finance charges. 
E) future value of all finance charges.

Question 18

Most single-payment loans are secured by ____________. ​

Accepted Answer

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

Question 19

Parent Loans for Undergraduate Students (PLUS)loans are made to the parents or legal guardians rather than to the students.

Accepted Answer

A) True 
 B)False

Question 20

Rebates are always more cost effective than the 0 percent annual percentage rate (APR)loans offered on automobile loans.

Accepted Answer

A) True 
 B)False

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of _____.

Commercial banks are able to charge lower interest rates than other lending institutions because:

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

Jamil is purchasing a new truck for $30,000.He is making a $2,000 down payment and will be making 60 monthly payments of $541 each.What are the total finance charges on this loan?

Calculating interest using the ____________ will result in the highest APR on a single-payment loan.

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

When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to use your savings to make a purchase.

To qualify for a subsidized Stafford loan,you must:

When comparing two installment loans with the same principal and annual percentage rate (APR),the loan with ____________.

Which of the following is true of loan collateral?

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:

Which of the following is a feature of a home equity loan?

The cash value of a wholelife insurance policy can be used as a source of loan collateral.

When loaning money to a friend or family member,it is advisable to lend only an amount that you can afford to give away.

When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to borrow to make a purchase.

Which of the following is recommended if you loan money to a friend or relative?

When the simple interest method is used to determine finance charges,the interest is calculated based on the:

Most single-payment loans are secured by ____________.

Parent Loans for Undergraduate Students (PLUS)loans are made to the parents or legal guardians rather than to the students.

Rebates are always more cost effective than the 0 percent annual percentage rate (APR)loans offered on automobile loans.

Understanding the Financial Planning Process

Using Financial Statements and Budgets

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, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 7: Using Consumer Loans

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of _____.

Commercial banks are able to charge lower interest rates than other lending institutions because:

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

Jamil is purchasing a new truck for $30,000.He is making a $2,000 down payment and will be making 60 monthly payments of $541 each.What are the total finance charges on this loan?

Calculating interest using the ____________ will result in the highest APR on a single-payment loan. ​

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

When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to use your savings to make a purchase.

To qualify for a subsidized Stafford loan,you must:

When comparing two installment loans with the same principal and annual percentage rate (APR),the loan with ____________. ​

Which of the following is true of loan collateral?

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:

Which of the following is a feature of a home equity loan?

The cash value of a wholelife insurance policy can be used as a source of loan collateral.

When loaning money to a friend or family member,it is advisable to lend only an amount that you can afford to give away.

When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to borrow to make a purchase.

Which of the following is recommended if you loan money to a friend or relative?

When the simple interest method is used to determine finance charges,the interest is calculated based on the:

Most single-payment loans are secured by ____________. ​

Parent Loans for Undergraduate Students (PLUS)loans are made to the parents or legal guardians rather than to the students.

Rebates are always more cost effective than the 0 percent annual percentage rate (APR)loans offered on automobile loans.

Understanding the Financial Planning Process

Using Financial Statements and Budgets

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, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Calculating interest using the ____________ will result in the highest APR on a single-payment loan.

When comparing two installment loans with the same principal and annual percentage rate (APR),the loan with ____________.

Most single-payment loans are secured by ____________.