Deck 12: Consumer Credit

Question 1

The amount that must be paid when the purchase is paid for over a period of time is called the installment price.

Answer 1

True

Question 2

The refund fraction is the sum of the number of months remaining divided by the sum of the number of months of the loan.

Answer 2

True

Question 3

The rebate amount is equal to the rebate fraction:

A) divided by the number of weeks of the loan
B) multiplied by the number of months of a loan
C) divided by the total interest
D) multiplied by the total finance charge

Answer 3

multiplied by the total finance charge

Question 4

The installment payment is equal to the installment price divided by the number of payments.

Question 5

The amount of a loan is:

A) installment price - interest - down payment
B) installment price - interest + down payment
C) installment price - payments + purchases
D) the installment price + interest - down payment

Question 6

When compared to a lower APR, the table value for a higher APR:

A) is found by moving down the column for the lower APR
B) will always have a higher factor when comparing the same number of payments
C) is exactly the same, when comparing other fees and charges
D) is a more accurate representation of current interest rates

Question 7

The true rate of interest that you pay on a loan is called the:

A) APR
B) refund fraction
C) constant ratio
D) Rule of 78

Question 8

A basic installment loan is one in which there is no fixed number of payments.

Question 9

When calculating the average daily balance, cash advances are:

A) added in
B) sometimes subtracted out
C) sometimes added in
D) subtracted out

Question 10

The cash price of an item is the amount you would have paid if the full amount was paid at the time of purchase.

Question 11

The average daily balance is the same as the average balance.

Question 12

The installment price minus the down payment equals the:

A) total payments
B) cash price
C) carrying charge
D) net price

Question 13

Bank loans and car loans are examples of open-end loans.

Question 14

When calculating the payoff amount on a loan, the first step is to calculate the interest outstanding on the loan.

Question 15

An open-end loan disallows additional credit until the initial amount is paid off.

Question 16

Loans with regular payments for a specific number of payments are called:

A) basic installment loans
B) open-end loans
C) APR loans
D) down payment loans

Question 17

Open-end loans are often called line-of-credit accounts.

Question 18

The finance charge is equal to the total of all monthly payments less the amount financed.

Question 19

The total amount that must be paid when the purchase is paid for over a given period of time is the:

A) installment price
B) amount financed
C) financed price
D) cash price

Question 20

Loans with a specific number of payments made on a regular basis are called installment loans.

Question 21

The finance charge on a loan is equal to the total of the monthly payments:

A) plus the amount financed
B) divided by the amount financed
C) multiplied by the amount financed
D) less the amount financed

Question 22

When using the unpaid or previous month's balance method:

A) the billing cycle is always 30 or 31 days
B) you should first multiply the unpaid or previous month's balance by the monthly rate
C) the first step in calculating the new unpaid balance is to determine the purchases for the period and then add them to the previous balance
D) the average daily balance is the same as the unpaid balance

Question 23

The total cost of an installment purchase is equal to the number of payments times the amount of each payment minus the down payment.

Question 24

The billing cycle of an open-end credit account is always 30 or 31 days.

Question 25

A refund fraction shows what portion of the total finance charge has been paid at the time a loan is paid off.

Question 26

If an installment loan is paid in full before the maturity date, the full amount of interest on the loan must still be paid.

Question 27

The installment price minus the down payment equals the:

A) carrying charge
B) total payments
C) cash price
D) net price

Question 28

To find the total cost of a purchase, multiply the amount of each payment by the number of payments in the loan and then add the:

A) amount financed
B) finance charge
C) installment payment
D) down payment

Question 29

Finance charge and carrying charge both mean interest.

Question 30

The Truth in Lending Act regulates interest rates.

Question 31

Which of the following statements is correct?

A) An open-end loan disallows additional credit until the initial amount is paid off.
B) The average daily balance is equal to the sum of the daily balances divided by the number of days in the billing cycle.
C) The average daily balance is the same as the average balance.
D) With open-end loans, an individual makes regular fixed dollar payments for a specified period of time.

Question 32

The cost of an item if the full amount had been paid at the time of sale is called the:

A) down payment price
B) cash price
C) total price
D) installment price

Question 33

The installment price of an item does not include the cash price.

Question 34

To find the finance charge using the average daily balance method, a month is always considered to have 30 days.

Question 35

Open-end loans are also known as:

A) line-of-credit accounts
B) APR loans
C) installment loans
D) basic loans

Question 36

The law that requires that a lending institution disclose to the borrower in writing the actual rate of interest is known as the:

A) APR Law
B) Constant Formula Disclosure Law
C) Rule of 78
D) Truth in Lending Act

Question 37

The difference between the installment price of an item and the cash price is the down payment.

Question 38

With open-end loans, an individual makes regular fixed dollar payments for a specific period of time.

Question 39

Which of the following statements is true regarding the unpaid or previous month's balance method:

A) cash purchases are not allowed under this method
B) new purchases or payments during the month affect the finance charge
C) new purchases or payments during the month do not affect the finance charge
D) interest rates charged are always higher than the average daily balance method

Question 40

The amount financed is equal to the cash price plus the down payment.

Question 41

The letters APR stand for annual percentage rate.

Question 42

The unpaid balance in an account on May 1 was $223. A purchase of $17 was made on May 7. A $ 20 payment was made on May 20. The interest rate per month was 1.65% per month of the average daily balance. Find the new balance at the end of May.

A) $205.01
B) $221.65
C) $225.08
D) $223.78

Question 43

Find the installment price of a table bought on the installment plan with a down payment of $30 and 6 payments of $51.12.

A) $30
B) $306.72
C) $366.72
D) $336.72

Question 44

The___________ is the sum of the number of months remaining on a loan divided by the sum of the total number of months of the loan.

A) finance charge
B) refund fraction
C) constant ratio
D) Rule of 78

Question 45

The Rule of 78 got its name from the sum of the number of parts of accruing interest for a 12-month loan.

Question 46

The installment price minus the down payment is equal to the amount financed.

Question 47

Patricia took out a loan for for an expensive sports car. The total interest for the 37 month loan was $23,091. Find the interest which will be refunded if she pays the loan in full with 5 payments remaining.

A) $520.07
B) $492.70
C) $328.46
D) $346.71

Question 48

Find the annual percentage rate using the table.


-A bicycle is purchased for $940 and financed for 12 months. If the total finance charge is $64.39, find the annual percentage rate.

A) 12.25%
B) 12.00%
C) 12.50%
D) 12.75%

Question 49

The finance charge on a loan for a $950 TV was $171 for a 12-month note with no down payment. Find the finance charge refund if the loan was paid in full at the end of 4 months.

A) $438.46
B) $78.92
C) $101.75
D) $21.92

Question 50

The monthly payments are calculated by adding the finance charge and the amount financed and dividing by the number of payments in the loan.

Question 51

James has a credit card with a monthly rate of 1.7%. The account applies the unpaid balance method. His unpaid balance for the Feb billing cycle is $546.50. During the billing cycle he made purchases of $394.01, returned items for $40.44, and made a payment of $170.00. Find the new balance.

A) $779.80
B) $739.36
C) $192.86
D) $820.24

Question 52

The Truth in Lending Law requires that a lending institution must tell the borrower, in writing, what the actual interest rate is going to be.

Question 53

The average daily balance is equal to the sum of the daily balances divided by the number of days in the billing cycle.

Question 54

The installment price of a food processor is $379.48 with 18 monthly payments and a down payment of $40. Find the monthly payment.

A) $339.48
B) $39.48
C) $18.86
D) $0.52

Question 55

Find the amount financed if a $25 down payment is made on a camera with a cash price of $260.

A) $260
B) $315.86
C) $235
D) $25

Question 56

Loans in which there is no fixed number of payments and the interest is calculated on the unpaid balance at the end of each payment period are referred to as:

A) closed-end loans
B) average daily balance loans
C) basic installment loans
D) open-end loans

Question 57

When interest is calculated on the unpaid balance of a loan at the end of each payment period you are working with a basic installment loan.

Question 58

A fraction that shows what portion of the total finance charge has not been paid at the time a loan is paid off is called the:

A) constant ratio
B) finance rebate
C) pay-off ratio
D) refund fraction

Question 59

Find the amount financed on a TV with a cash price $430.00 and a down payment of $86.00.

A) $86.00
B) $430.00
C) $344.00
D) $429.80

Question 60

The numerator of the rebate fraction is the number of months remaining on a loan.

Question 61

The unpaid balance in an account on December 1 was $145. A payment of $60 was made on December 14. The interest rate per month was 1.7% per month of the average daily balance. Find the finance charge for the month of December.

A) $3.91
B) $1.97
C) $1.87
D) $1.45

Question 62

Find the annual percentage rate using the table.


-Eileen purchased a sofa for $540 and financed it for 17 months. The total finance charge was $85.48. Find the annual percentage rate.

A) 20.00%
B) 20.25%
C) 20.50%
D) 20.75%

Question 63

The unpaid balance in an account on November 1 was $125. A payment of $25 was made on November 9. The interest rate per month was 1.65% per month of the average daily balance. Find the finance charge for the month of November.

A) $1.76
B) $1.77
C) $3.71
D) $1.65

Question 64

The installment price of a watch is $310.74 with 6 monthly payments and a down payment of $30. Find the monthly payment.

A) $16.74
B) $280.74
C) $19.26
D) $46.79

Question 65

A mountain bike has a cash price of $690.00. Eric purchases the bike by making a down payment of $69.00 and 24 payments of $38.74. Find the finance charge.

A) $310.50
B) $621.00
C) $69.00
D) $308.76

Question 66

The unpaid balance in an account at the beginning of December was $176. A payment of $55 was made on December 23. The interest rate per month was 1.6% per month of the average daily balance. Find the new balance at the end of December.

A) $123.56
B) $122.60
C) $146.61
D) $123.50

Question 67

The March 1 unpaid balance in an account was $229. On March 5, a payment of $80 was made. The interest rate per month was 1.7% per month of the average daily balance. Find the new balance at the end of March.

A) $150.70
B) $176.08
C) $151.63
D) $151.71

Question 68

Chaundra has a credit card with a monthly rate of 1.3% .The account applies the unpaid balance method. Her unpaid balance for the June billing cycle is $704.42. During the month of June, she made purchases of $452.61, returned items worth $17.69 and made a payment of $105. Find her new balance.

A) $1034.34
B) $1061.19
C) $1042.13
D) $1043.50

Question 69

What is the monthly interest rate if an annual rate is 17.5%?

A) 1.46%
B) 16.5%
C) 14.58%
D) 1.4%

Question 70

On April 1, the unpaid balance in an account was $174. A payment of $70 was made on April 8. On April 26 a $26 purchase was made. The interest rate per month was 1.75% per month of the average daily balance. Find the new balance at the end of April.

A) $132.18
B) $106.11
C) $176.11
D) $131.75

Question 71

Susan has a credit card with a monthly rate of 1.4%. The account applies the unpaid balance method. The unpaid balance for her Apr billing cycle is $415.20. During the billing cycle she made purchases of $189.36 returned items for $17.08, and made a payment of $60.00. Find the new balance.

A) $567.45
B) $118.09
C) $533.29
D) $550.37

Question 72

On October 1, the unpaid balance in an account was $185. No payments were made that month. The interest rate per month was 1.75% per month of the average daily balance. Find the finance charge for the month of October.

A) $3.06
B) $3.14
C) $3.41
D) $3.24

Question 73

Find the installment price of a laptop computer bought on the installment plan with $90 down and 36 payments of $33.05.

A) $90
B) $1279.80
C) $939.99
D) $1189.80