Question 1

The worst outcome from identity theft is that you could be responsible for charges someone made fraudulently on your credit card.

Accepted Answer

A) True 
 B)False  False

Question 2

Beth wants to borrow $18 000 for five years and she has a choice of two loans.One carries an annual rate of 10 percent and the other a 9.5 percent rate compounded semi-annually.Which is her best choice? Calculate the answer by comparing the effective annual rates of interest.

Accepted Answer

Math calculations are required to compute the effective annual rate of 9.5 percent calculated semi-annually to compare it to the 10 percent annual rate.There are several methods,but here are two solutions.Calculator keystrokes 9.5; second function key; Effective key; 2 = 9.72,or you can calculate by using the formula and calculator.
The formula for effective rate EFF = (1 + (i / n))? - 1.Substituting for the formula:
Effective rate is (1 + (0.095/2))squared -1 = 1.0475 squared -1 = 0.0972 or 9.72 percent.
Keystrokes are 1.0475 2nd function key to the power 2 = 1.09725 - 1 = 9.72.

Question 3

If you have a poor credit score,there may be lenders willing to loan you money but at a higher interest rate.

Accepted Answer

A) True 
 B)False  True

Question 4

If a person obtains your credit card number by standing close enough to you to either see your credit card or hear you speak the number during a telephone call,he or she is

Accepted Answer

A)  shoulder surfing.
B)  pharming.
C)  pretexting.
D)  skimming.

Question 5

Which of the following is a true statement about student loans?

Accepted Answer

A)  The Federal Government is responsible for all student loans.
B)  Loan limits are higher for students who are dependants.
C)  The repayment schedule is deferred.
D)  Students who declare bankruptcy within seven years of graduation may have their loans forgiven.

Question 6

Acquiring and using a credit card is an excellent way to start building your credit history.

Accepted Answer

A) True 
 B)False

Question 7

Harry purchased his condo for $330 000 and now the appraised value is $360000.His outstanding mortgage is $228 000.What is the maximum home equity line of credit Harry would qualify for?

Accepted Answer

A)  $36 000
B)  $60 000
C)  $72 000
D)  $105,600

Question 8

A person can be declared insolvent if

Accepted Answer

A)  he or she has more debts than assets.
B)  his or her spouse is insolvent as well.
C)  he or she owes $1000 and is unable to pay.
D)  his or her monthly payments exceed $1000.

Question 9

Sue obtains a one year loan of $3000 based on an annual interest rate of 12 percent.What would be the monthly payment to pay it off in one year?

Accepted Answer

A)  $278
B)  $280
C)  $303
D)  $266

Question 10

Jacob needs to borrow $19 000 to purchase a car.If the interest rate is seven percent compounded monthly,which of the following is true when considering a five,seven or ten year term?

Accepted Answer

A)  If he selects a seven year term he will save interest by keeping his payments to $286.76 per month.
B)  If he selects a ten year term he will save $2385.28 in interest compared with the seven year term.
C)  If he selects a five year term he will save $1514.55 in interest compared with the seven year term.
D)  The overall interest will be the same,regardless of the term.

Question 11

If Brian has a home worth $400 000 and a mortgage of $200 000,he should be able to get a HELOC for $160 000 at a better interest rate than if he got an unsecured line of credit.

Accepted Answer

A) True 
 B)False

Question 12

Credit insurance

Accepted Answer

A)  is a free benefit on most credit cards.
B)  can be used to pay off all debt when a creditor becomes unemployed.
C)  is a good substitute for health and disability insurance.
D)  can cover monthly credit repayments if a consumer cannot work.

Question 13

The advantage of leasing over purchasing a vehicle is

Accepted Answer

A)  no deposit is required.
B)  lower monthly payments than for borrowing.
C)  there is less hassle than when purchasing a vehicle.
D)  there are no maintenance expenses.

Question 14

Collateral

Accepted Answer

A)  gives the lender additional recourse if the payments are not made.
B)  is used on unsecured loans.
C)  increases the interest rate on loans.
D)  is required on all loans except revolving credit.

Question 15

In making the purchase versus lease decision,it is important to remember that

Accepted Answer

A)  dealers may impose additional charges for leasing.
B)  leasing is less risky because you do not have equity.
C)  leasing is less expensive overall than purchasing.
D)  you won't be required to pay maintenance costs on the leased car.

Question 16

If you were charged the maximum legal rate of interest on a $1000 loan for one year,the interest cost would be $60.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following can be used by a creditor in deciding whether or not to grant credit?

Accepted Answer

A)  Credit history
B)  Marital status
C)  Gender
D)  Any of the above

Question 18

A 20 percent annual interest rate on a $10 000 loan amortized over five-years would result in interest charges of $10 000.

Accepted Answer

A) True 
 B)False

Question 19

Which would be the best loan offer? Loan A has a 9.5 percent rate calculated quarterly and Loan B has a 9.25 percent rate calculated monthly.

Accepted Answer

A)  The effective rate on Loan A is 9.84 percent and on Loan B is 9.92.percent.Therefore,Loan A is best.
B)  The effective rate on Loan A is 9.84 percent and on Loan B is 9.65 percent.Therefore,Loan B is best.
C)  Loan B is a lower interest rate,so it is the better choice.
D)  Loan A is compounded less frequently,so it would be the best option.

Question 20

Revolving open-end credit typically does not specify a maximum amount that can be borrowed.

Accepted Answer

A) True 
 B)False

Exam 2: Managing Your Financial Resources - Assessing,Managing and Securing Your Credit

The worst outcome from identity theft is that you could be responsible for charges someone made fraudulently on your credit card.

Beth wants to borrow $18 000 for five years and she has a choice of two loans.One carries an annual rate of 10 percent and the other a 9.5 percent rate compounded semi-annually.Which is her best choice? Calculate the answer by comparing the effective annual rates of interest.

If you have a poor credit score,there may be lenders willing to loan you money but at a higher interest rate.

If a person obtains your credit card number by standing close enough to you to either see your credit card or hear you speak the number during a telephone call,he or she is

Which of the following is a true statement about student loans?

Acquiring and using a credit card is an excellent way to start building your credit history.

Harry purchased his condo for $330 000 and now the appraised value is $360000.His outstanding mortgage is $228 000.What is the maximum home equity line of credit Harry would qualify for?

A person can be declared insolvent if

Sue obtains a one year loan of $3000 based on an annual interest rate of 12 percent.What would be the monthly payment to pay it off in one year?

Jacob needs to borrow $19 000 to purchase a car.If the interest rate is seven percent compounded monthly,which of the following is true when considering a five,seven or ten year term?

If Brian has a home worth $400 000 and a mortgage of $200 000,he should be able to get a HELOC for $160 000 at a better interest rate than if he got an unsecured line of credit.

Credit insurance

The advantage of leasing over purchasing a vehicle is

Collateral

In making the purchase versus lease decision,it is important to remember that

If you were charged the maximum legal rate of interest on a $1000 loan for one year,the interest cost would be $60.

Which of the following can be used by a creditor in deciding whether or not to grant credit?

A 20 percent annual interest rate on a $10 000 loan amortized over five-years would result in interest charges of $10 000.

Which would be the best loan offer? Loan A has a 9.5 percent rate calculated quarterly and Loan B has a 9.25 percent rate calculated monthly.

Revolving open-end credit typically does not specify a maximum amount that can be borrowed.