Question 1

FICO is a better score to use than VantageScore for consumers with limited credit histories.

Accepted Answer

A) True 
 B)False  False

Question 2

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?

Accepted Answer

A)  $50,000 
B)  $80,000 
C)  $110,000 
D)  $150,000 
E)  $160,000 
A)  $50,000 
B)  $80,000 
C)  $110,000 
D)  $150,000 
E)  $160,000 C

Question 3

Experts suggest that you spend more than 20% of your net (after-tax) income on consumer credit payments.

Accepted Answer

A) True 
 B)False  False

Question 4

Using the simple interest formula, the interest on a $1,000 loan at 5% interest for one year is $55.

Accepted Answer

A) True 
 B)False

Question 5

A credit card holder who pays off his balances in full each month is known as

Accepted Answer

A)  An impulsive lender. 
B)  A convenience user. 
C)  A home equity holder. 
D)  A borrower 
E)  All of these are correct. 
A)  An impulsive lender. 
B)  A convenience user. 
C)  A home equity holder. 
D)  A borrower 
E)  All of these are correct.

Question 6

Rachel Johnson went to the ATM to withdraw $300 cash with her debit card. She inadvertently pulled out her credit card instead, not realizing the expenses for cash advances. If her credit card company charges a cash advance fee of 3% and interest at 24% APR, what are the total fees she will pay for her mistake?

Accepted Answer

A)  $3 
B)  $6 
C)  $9 
D)  $15 
E)  $24 
A)  $3 
B)  $6 
C)  $9 
D)  $15 
E)  $24

Question 7

The debt-to-equity ratio is calculated by dividing your total liabilities, including your mortgage, by your net worth.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is NOT associated with credit cards?

Accepted Answer

A)  A grace period 
B)  A finance charge 
C)  An annual fee 
D)  Convenience users and borrowers 
E)  A down payment on a home 
A)  A grace period 
B)  A finance charge 
C)  An annual fee 
D)  Convenience users and borrowers 
E)  A down payment on a home

Question 9

Which of the following is NOT a valid credit application question?

Accepted Answer

A)  How much of a loan are you requesting? 
B)  What is the account number for your checking account? 
C)  What is the name of the nearest relative not living with you? 
D)  How many dependents do you have? 
E)  All of these are valid credit application questions. 
A)  How much of a loan are you requesting? 
B)  What is the account number for your checking account? 
C)  What is the name of the nearest relative not living with you? 
D)  How many dependents do you have? 
E)  All of these are valid credit application questions.

Question 10

A prearranged loan for a specified amount that a consumer can use by writing a special check is known as

Accepted Answer

A)  A bank credit card. 
B)  A revolving check credit. 
C)  Installment sales credit. 
D)  Single lump-sum credit. 
E)  Closed-end credit. 
A)  A bank credit card. 
B)  A revolving check credit. 
C)  Installment sales credit. 
D)  Single lump-sum credit. 
E)  Closed-end credit.

Question 11

Timothy Carter has net monthly income of $3,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,200, and a credit card minimum payment of $45. What is his debt-payments-to-income ratio?

Accepted Answer

A)  13.2% 
B)  14.3% 
C)  36.7% 
D)  42.0% 
E)  45.9% 
A)  13.2% 
B)  14.3% 
C)  36.7% 
D)  42.0% 
E)  45.9%

Question 12

Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power.

Accepted Answer

A) True 
 B)False

Question 13

When misused , credit can result in

Accepted Answer

A)  Default. 
B)  Bankruptcy. 
C)  Loss of creditworthiness. 
D)  A less satisfying life. 
E)  All of the above. 
A)  Default. 
B)  Bankruptcy. 
C)  Loss of creditworthiness. 
D)  A less satisfying life. 
E)  All of the above.

Question 14

Which of the following is NOT one of the three major credit bureaus?

Accepted Answer

A)  Experian. 
B)  Equifax. 
C)  Trans Union. 
D)  FICO. 
E)  VantageScore 
A)  Experian. 
B)  Equifax. 
C)  Trans Union. 
D)  FICO. 
E)  VantageScore

Question 15

Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors seeking to erase all debts will have to wait ___ year(s) from their last bankruptcy before they can file again.

Accepted Answer

A)  one 
B)  three 
C)  seven 
D)  eight 
E)  ten 
A)  one 
B)  three 
C)  seven 
D)  eight 
E)  ten

Question 16

Credit reports can be obtained for all of the following reasons except

Accepted Answer

A)  In response to a court order. 
B)  In connection with a credit transaction. 
C)  For underwriting of insurance. 
D)  Inquiry by a neighbor. 
E)  For some legitimate business need. 
A)  In response to a court order. 
B)  In connection with a credit transaction. 
C)  For underwriting of insurance. 
D)  Inquiry by a neighbor. 
E)  For some legitimate business need.

Question 17

Which of the following is NOT correct?

Accepted Answer

A)  Using credit permits the purchase of goods even when funds are low 
B)  Using credit can decrease the amount of money that will be available to spend in the future. 
C)  Using credit offers convenience when shopping on the Internet. 
D)  Using credit cards typically provides a "float" of up to 10 days. 
E)  Using credit allows a consumer to shop without carrying a large amount of cash. 
A)  Using credit permits the purchase of goods even when funds are low 
B)  Using credit can decrease the amount of money that will be available to spend in the future. 
C)  Using credit offers convenience when shopping on the Internet. 
D)  Using credit cards typically provides a "float" of up to 10 days. 
E)  Using credit allows a consumer to shop without carrying a large amount of cash.

Question 18

All of the following are warning signs of debt problems except

Accepted Answer

A)  You use savings to pay for necessities such as food and utilities. 
B)  You receive second and third payment due notices from creditors. 
C)  You exceed the credit limits on your credit cards. 
D)  You pay your credit card bills in full each period. 
E)  The total balance on your credit cards increases every month. 
A)  You use savings to pay for necessities such as food and utilities. 
B)  You receive second and third payment due notices from creditors. 
C)  You exceed the credit limits on your credit cards. 
D)  You pay your credit card bills in full each period. 
E)  The total balance on your credit cards increases every month.

Question 19

Information about a personal bankruptcy may be reported in your credit file for

Accepted Answer

A)  1 year. 
B)  3 years. 
C)  7 years. 
D)  10 years. 
E)  Permanently. 
A)  1 year. 
B)  3 years. 
C)  7 years. 
D)  10 years. 
E)  Permanently.

Question 20

The expected rate of inflation should not be considered when determining the amount of interest a lendor should charge.

Accepted Answer

A) True 
 B)False

FICO is a better score to use than VantageScore for consumers with limited credit histories.

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?

Experts suggest that you spend more than 20% of your net (after-tax) income on consumer credit payments.

Using the simple interest formula, the interest on a $1,000 loan at 5% interest for one year is $55.

A credit card holder who pays off his balances in full each month is known as

The debt-to-equity ratio is calculated by dividing your total liabilities, including your mortgage, by your net worth.

Which of the following is NOT associated with credit cards?

Which of the following is NOT a valid credit application question?

A prearranged loan for a specified amount that a consumer can use by writing a special check is known as

Timothy Carter has net monthly income of $3,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,200, and a credit card minimum payment of $45. What is his debt-payments-to-income ratio?

Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power.

When misused , credit can result in

Which of the following is NOT one of the three major credit bureaus?

Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors seeking to erase all debts will have to wait ___ year(s) from their last bankruptcy before they can file again.

Credit reports can be obtained for all of the following reasons except

Which of the following is NOT correct?

All of the following are warning signs of debt problems except

Information about a personal bankruptcy may be reported in your credit file for

The expected rate of inflation should not be considered when determining the amount of interest a lendor should charge.

Personal Financial Planning in Action

Money Management Skills

Taxes in Your Financial Plan

Financial Services: Saving Plans and Payment Accounts

Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Selecting and Financing Housing

Home and Automobile Insurance

Health and Disability Insurance

Financial Planning With Life Insurance

Investing Fundamentals and Bonds

Investing in Stocks

Investing in Mutual Funds

Starting Early: Retirement and Estate Planning

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Exam 5: Consumer Credit: Advantages, Disadvantages, Sources, and Costs

FICO is a better score to use than VantageScore for consumers with limited credit histories.

Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?

Experts suggest that you spend more than 20% of your net (after-tax) income on consumer credit payments.

Using the simple interest formula, the interest on a $1,000 loan at 5% interest for one year is $55.

A credit card holder who pays off his balances in full each month is known as

The debt-to-equity ratio is calculated by dividing your total liabilities, including your mortgage, by your net worth.

Which of the following is NOT associated with credit cards?

Which of the following is NOT a valid credit application question?

A prearranged loan for a specified amount that a consumer can use by writing a special check is known as

Timothy Carter has net monthly income of $3,800. He has a monthly auto loan payment of $350, a student loan payment of $150, a mortgage payment of $1,200, and a credit card minimum payment of $45. What is his debt-payments-to-income ratio?

Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power.

When misused , credit can result in

Which of the following is NOT one of the three major credit bureaus?

Following the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors seeking to erase all debts will have to wait ___ year(s) from their last bankruptcy before they can file again.

Credit reports can be obtained for all of the following reasons except

Which of the following is NOT correct?

All of the following are warning signs of debt problems except

Information about a personal bankruptcy may be reported in your credit file for

The expected rate of inflation should not be considered when determining the amount of interest a lendor should charge.

Personal Financial Planning in Action

Money Management Skills

Taxes in Your Financial Plan

Financial Services: Saving Plans and Payment Accounts

Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Selecting and Financing Housing

Home and Automobile Insurance

Health and Disability Insurance

Financial Planning With Life Insurance

Investing Fundamentals and Bonds

Investing in Stocks

Investing in Mutual Funds

Starting Early: Retirement and Estate Planning

Filters