Question 1

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

Accepted Answer

A)  Charge a market rate of interest. 
B)  Have a lawyer draft a loan contract. 
C)  Put the agreement in writing. 
D)  Make the loan due within one year or less. 
E)  All of the above 
A)  Charge a market rate of interest. 
B)  Have a lawyer draft a loan contract. 
C)  Put the agreement in writing. 
D)  Make the loan due within one year or less. 
E)  All of the above

Question 2

Generally speaking,variable rate loans are desirable if interest rates are expected to increase over the course of the loan.

Accepted Answer

A) True 
 B)False

Question 3

When the market interest rate goes up,the rate on variable rate loans goes up.

Accepted Answer

A) True 
 B)False

Question 4

College costs have been escalating,but not as rapidly as the overall rate of inflation.

Accepted Answer

A) True 
 B)False

Question 5

A loan from the cash value of your life insurance policy would be characterized by

Accepted Answer

A)  increased death benefits to beneficiaries. 
B)  increased premiums. 
C)  unchanged death benefits available to beneficiaries. 
D)  no specific repayment date. 
E)  annual percentage rates higher than other sources. 
A)  increased death benefits to beneficiaries. 
B)  increased premiums. 
C)  unchanged death benefits available to beneficiaries. 
D)  no specific repayment date. 
E)  annual percentage rates higher than other sources.

Question 6

A chattel mortgage is a legal claim that gives lenders the right to liquidate specific personal property to satisfy their claims in the event of default.

Accepted Answer

A) True 
 B)False

Question 7

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Loans to relatives and friends should be [verbal | written] agreements.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 8

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

Accepted Answer

A)  $275,000. 
B)  $250,000. 
C)  $225,000. 
D)  $ 25,000. 
E)  Taxable income. 
A)  $275,000. 
B)  $250,000. 
C)  $225,000. 
D)  $ 25,000. 
E)  Taxable income.

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-It is [legal | illegal] for a lender to charge a pre-payment penalty.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 10

Commercial banks generally 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)  depositors require lower rates. 
D)  they get their funds in the open credit market. 
E)  they make secured loans only. 
A)  they make shorter term loans. 
B)  they usually take only the best credit risks. 
C)  depositors require lower rates. 
D)  they get their funds in the open credit market. 
E)  they make secured loans only.

Question 11

If a 12-month installment loan is prepaid at the end of 6 months,less than one half of the interest would be saved.

Accepted Answer

A) True 
 B)False

Question 12

About one in four student loans are past due.

Accepted Answer

A) True 
 B)False

Question 13

If a loan has a prepayment penalty,there will be an additional cost to repay the loan early.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following loan sources is the most expensive?

Accepted Answer

A)  Commercial banks 
B)  Credit unions 
C)  Consumer finance companies 
D)  Savings and loan associations 
E)  None of the above 
A)  Commercial banks 
B)  Credit unions 
C)  Consumer finance companies 
D)  Savings and loan associations 
E)  None of the above

Question 15

Rebates are almost always more cost effective than the lower interest rate offered on automobile loans.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  Stafford and Perkins 
B)  Stafford and PLUS 
C)  Perkins and PLUS 
D)  PLUS and SLS 
E)  Perkins and SLS 
A)  Stafford and Perkins 
B)  Stafford and PLUS 
C)  Perkins and PLUS 
D)  PLUS and SLS 
E)  Perkins and SLS

Question 17

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-The majority of single payment loans [are | are not] secured by collateral.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 19

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 20

The add-on method is less expensive than the simple interest method when stated rates of interest are identical.

Accepted Answer

A) True 
 B)False

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

Generally speaking,variable rate loans are desirable if interest rates are expected to increase over the course of the loan.

When the market interest rate goes up,the rate on variable rate loans goes up.

College costs have been escalating,but not as rapidly as the overall rate of inflation.

A loan from the cash value of your life insurance policy would be characterized by

A chattel mortgage is a legal claim that gives lenders the right to liquidate specific personal property to satisfy their claims in the event of default.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Loans to relatives and friends should be [verbal | written] agreements.

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -It is [legal | illegal] for a lender to charge a pre-payment penalty.

Commercial banks generally charge lower interest rates than other lending institutions because

If a 12-month installment loan is prepaid at the end of 6 months,less than one half of the interest would be saved.

About one in four student loans are past due.

If a loan has a prepayment penalty,there will be an additional cost to repay the loan early.

Which of the following loan sources is the most expensive?

Rebates are almost always more cost effective than the lower interest rate offered on automobile loans.

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

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The majority of single payment loans [are | are not] secured by collateral.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

The add-on method is less expensive than the simple interest method when stated rates of interest are identical.

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

Planning for Retirement

Preserving Your Estate

Filters

Exam 7: Using Consumer Loans

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

Generally speaking,variable rate loans are desirable if interest rates are expected to increase over the course of the loan.

When the market interest rate goes up,the rate on variable rate loans goes up.

College costs have been escalating,but not as rapidly as the overall rate of inflation.

A loan from the cash value of your life insurance policy would be characterized by

A chattel mortgage is a legal claim that gives lenders the right to liquidate specific personal property to satisfy their claims in the event of default.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Loans to relatives and friends should be [verbal | written] agreements.

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -It is [legal | illegal] for a lender to charge a pre-payment penalty.

Commercial banks generally charge lower interest rates than other lending institutions because

If a 12-month installment loan is prepaid at the end of 6 months,less than one half of the interest would be saved.

About one in four student loans are past due.

If a loan has a prepayment penalty,there will be an additional cost to repay the loan early.

Which of the following loan sources is the most expensive?

Rebates are almost always more cost effective than the lower interest rate offered on automobile loans.

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

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -When the interest rate on savings is higher than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The majority of single payment loans [are | are not] secured by collateral.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -When the interest rate on savings is lower than the interest rate on a loan,it is less expensive to [borrow | use savings] to make a purchase.

The add-on method is less expensive than the simple interest method when stated rates of interest are identical.

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

Planning for Retirement

Preserving Your Estate

Filters