Question 1

Most people who are in debt over their heads are:

Accepted Answer

A)   criminals who take advantage of creditors.
B)   living in poverty-stricken areas.
C)   expected to declare Chapter 11 bankruptcy.
D)   not college educated.
E)   basically honest people.

Question 2

In addition to the Consumer Credit Counseling Service, universities, credit unions, military bases, and state and federal housing authorities sometimes provide credit counseling services.

Accepted Answer

A) True 
 B)False

Question 3

If your credit company invites you to skip a monthly payment without a penalty, they are doing you a favor.

Accepted Answer

A) True 
 B)False  False

Question 4

Chuck Spencer wants to borrow money for three years to purchase a new car. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by:

Accepted Answer

A)   sharing the interest rate risk.
B)   increasing his monthly payments.
C)   taking a larger stake in the asset he is purchasing.
D)   repaying the loan over a faster period of time.
E)   pledging collateral.

Question 5

Explain the Rule of 78s.

Accepted Answer

The answer of Explain the Rule of 78s....

Question 6

Credit unions rarely offer the same range of consumer loans that banks and other financial institutions do.

Accepted Answer

A) True 
 B)False  False

Question 7

Float can be defined as:

Accepted Answer

A)   the interest charged during one billing period.
B)   the principal balance due on a loan.
C)   a home equity loan.
D)   a period of time during which no interest is charged.
E)   a lump-sum loan from a credit union.

Question 8

The finance charge is the total dollar amount you pay to use credit.

Accepted Answer

A) True 
 B)False

Question 9

What can you do if you are unable to meet your credit obligations?

Accepted Answer

The answer of What can you do if you are...

Question 10

The CCCS sometimes charges a fee if it:

Accepted Answer

A)   administers a debt repayment plan.
B)   helps families manage their debts better.
C)   sets up a realistic budget for them.
D)   provides education to needy families.
E)   contacts creditors.

Question 11

The Federal Trade Commission enforces the:

Accepted Answer

A)   Truth in Lending Act.
B)   Equal Credit Opportunity Act.
C)   Fair Credit Billing Act.
D)   Fair Debt Collection Practices Act.
E)   Fair Credit Reporting Act.

Question 12

One of the drawbacks of borrowing from parents or family members is that such loans:

Accepted Answer

A)   tend to be more expensive than other types of loans.
B)   must be interest-free.
C)   may create tension within the family.
D)   are limited to oral agreements.
E)   are legally prohibited from establishing repayment dates and terms.

Question 13

With collateral, you will probably pay a higher interest rate on your loan than you would without collateral.

Accepted Answer

A) True 
 B)False  False

Question 14

Which lender is likely to ask you to write a check for $115 before granting you a $100 loan?

Accepted Answer

A)   Credit union
B)   Payday advance company
C)   Finance company
D)   Department store
E)   Commercial bank

Question 15

The most expensive loans are available from:

Accepted Answer

A)   parents.
B)   friends.
C)   banks.
D)   finance companies.
E)   credit unions.

Question 16

The Consumer Credit Counseling Service will refinance all of your existing debts for you.

Accepted Answer

A) True 
 B)False

Question 17

Banks often encourage you to make the maximum payment.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following is not a danger signal of potential debt problems?

Accepted Answer

A)   Paying the minimum balance due each month
B)   Receiving notice of prompt payment from creditors
C)   Using savings to pay for major purchases
D)   Repaying loans faster than required
E)   Depending on overtime and moonlighting to meet expenses

Question 19

Chuck Stallings qualifies for a credit card from J.C. Penney. Which of the following offers this type of loan?

Accepted Answer

A)   Credit union
B)   Payday advance company
C)   Finance company
D)   Department store
E)   Commercial bank

Question 20

The rule of 78s formula dictates that you pay less interest at the beginning of a loan.

Accepted Answer

A) True 
 B)False

Exam 7: Choosing a Source of Credit: The Costs of Credit Alternatives

Most people who are in debt over their heads are:

Correct AnswerverifiedShow Answer

In addition to the Consumer Credit Counseling Service, universities, credit unions, military bases, and state and federal housing authorities sometimes provide credit counseling services.

Correct AnswerverifiedShow Answer

If your credit company invites you to skip a monthly payment without a penalty, they are doing you a favor.

Correct AnswerverifiedFalse

Chuck Spencer wants to borrow money for three years to purchase a new car. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by:

Correct AnswerverifiedShow Answer

Explain the Rule of 78s.

Correct AnswerverifiedShow Answer

Credit unions rarely offer the same range of consumer loans that banks and other financial institutions do.

Correct AnswerverifiedFalse

Float can be defined as:

Correct AnswerverifiedShow Answer

The finance charge is the total dollar amount you pay to use credit.

Correct AnswerverifiedShow Answer

What can you do if you are unable to meet your credit obligations?

Correct AnswerverifiedShow Answer

The CCCS sometimes charges a fee if it:

Correct AnswerverifiedShow Answer

The Federal Trade Commission enforces the:

Correct AnswerverifiedShow Answer

One of the drawbacks of borrowing from parents or family members is that such loans:

Correct AnswerverifiedShow Answer

With collateral, you will probably pay a higher interest rate on your loan than you would without collateral.

Correct AnswerverifiedFalse

Which lender is likely to ask you to write a check for $115 before granting you a $100 loan?

Correct AnswerverifiedShow Answer

The most expensive loans are available from:

Correct AnswerverifiedShow Answer

The Consumer Credit Counseling Service will refinance all of your existing debts for you.

Correct AnswerverifiedShow Answer

Banks often encourage you to make the maximum payment.

Correct AnswerverifiedShow Answer

Which one of the following is not a danger signal of potential debt problems?

Correct AnswerverifiedShow Answer

Chuck Stallings qualifies for a credit card from J.C. Penney. Which of the following offers this type of loan?

Correct AnswerverifiedShow Answer

The rule of 78s formula dictates that you pay less interest at the beginning of a loan.

Correct AnswerverifiedShow Answer

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False

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