Personal Finance

After you have selected a product, you should buy it immediately before the store runs out of it. false
Parents or family members are often the source of the least expensive loans. true
The least expensive loans are available from finance companies and retailers. false
Two key concepts that you should keep in mind when borrowing are the finance charge and the annual percentage rate. true
The annual percentage rate is the percentage cost of credit on a yearly basis. true
With collateral, you will probably pay a higher interest rate on your loan than you would without collateral. false
The two most common methods of calculating interest are compound and simple interest formulas. true
When more than one payment is made on a simple interest loan, the method of computing interest is known as the declining balance method. true
The fairest method of calculating interest is the adjusted balance method. false
If creditors add finance charges after subtracting payments made during the billing period, this is called the previous balance method. false
The Truth in Lending law does not set the interest rates or tell the creditor how to make interest calculations. true
Inflation increases the purchasing power of money. false
Banks often encourage you to make the maximum payment. false
Under the rule of 78s, loans for a year or less usually do not allow for a finance charge rebate. true
Credit life insurance provides for the repayment of the insured loan if the borrower dies. true
The Fair Debt Collection Practices Act regulates the ways debt collection agencies do business. true
Overindulgence of children is a signal of potential debt problems. true
There is never a charge for any service provided by a Consumer Credit Counseling Service office. false
The Consumer Credit Counseling Service will refinance all of your existing debts for you. false
An increasing number of bankruptcy filers are well-educated, middle-class baby boomers. true
You have two choices in declaring personal bankruptcy: Chapter 7 and Chapter 13 bankruptcy. true
Chapter 7 bankruptcy is also known as straight bankruptcy. true
In a straight bankruptcy, many, but not all, debts are forgiven. true
You have the right to file your own bankruptcy case and represent yourself at all court hearings. true
If you declare a Chapter 7 bankruptcy, you do not have to pay alimony, child support, or educational loans. false
Credit unions will provide loans to non-members in some situations. false
Which one of the following financing methods provides a float period? credit card
Which one of the following is often the source of the least expensive loan? parents or family members
Your bankcard has an APR of 18% and there is a 2% fee for cash advances. The bank starts charging interest on cash advances immediately. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge you will pay on this cash advance for the month? Assume each month has 30 days. Finance charge = [.02 × $600] + [(.18/12) × $600] = $21
Membership in credit unions has been: growing steadily
Which federal law, passed in 1969, requires creditors to state the cost of borrowing in common language? Truth in Lending Act
If you borrow $100 at 10 percent simple annual interest and repay it in one lump-sum at the end of one year, you will repay: Repayment = $100 + (.10 × $100) = $110
If creditors give you no credit for payments made during the billing period, this is called the: previous balance method.
The most commonly purchased type of credit insurance is: credit life insurance.
Which formula dictates that you pay more interest at the beginning of the loan and pay less and less interest as the debt is reduced? The rule of 78s
According to consumer affairs experts, the nation’s number one family financial problem is: over-indebtedness.
The Federal Trade Commission enforces the: Fair Debt Collection Practices Act.
A few months ago, you sent a certified letter to a debt collector and requested verification of a debt the collector says you owe. You know the letter was received by the collector but you have received no response to your request. Today, you received a letter threatening court action. What should you do? Insist that communications about the debt cease
Excessive indebtedness can result in: Almost any bad stress-induced behavior could be a result of excessive indebtedness, including all of these behaviors.
Most people who are in debt over their heads are: basically honest people.
The CCCS aids families by: setting up a budget for them.
The CCCS sometimes charges a fee if it: administers a debt repayment plan.
In a Chapter 7 bankruptcy, a person filing for relief is called a: debtor.
In a Chapter 7 bankruptcy, the debtor: is required to draw up a petition listing all assets and liabilities.
Which lender is likely to ask you to write a check for $115 before granting you a $100 loan? Payday advance company
Frank West wants to borrow money for three years to purchase a new boat. 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: sharing the interest rate risk.
Patricia Newton is going to buy a new car, and she needs to apply for a loan to cover the purchase. She knows she can get a loan for up to 6 years, but she would prefer a shorter-term loan. She selects a 4-year loan. Patricia reducing her lender’s risk by: repaying the loan faster.
Randy Ice starts the month with a balance on his credit card of $1000. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $500. The average daily balance for the month including the new purchase is $883. The average daily balance for the month excluding the new purchase is $750. The bank charges 1.5 percent per month and uses the average daily balance excluding new purchases method. What would Randy’s finance charges be for the month? Interest = $750 × .015 = $11.25
Sarah Parker’s husband goes out with the ‘boys’ for a night on the town and gets home at 4 am waking everyone in the house. In response, Sarah goes out the next day and spends $500 in new clothes for herself putting it all on her credit card. Which one of the answers best explains Sarah’s spending? The use of money to punish
Gary Simpson notices that his neighbor has a brand new Ford F150 truck parked in the driveway. Even though his current car is fine, Gary decides that he needs a new car and goes out and purchases a Hummer with a six-year loan. Which one of the answers best explains Gary’s spending? Keeping up with the Joneses
Which one of these methods is the fairest of calculating interest? Average daily including purchases method
Payday, cash advance, check advance, and post-dated checks are _________ loans. expensive
If a new-car loan costs 6%, a used-car loan would cost approximately ___ percent. 7
You just received your credit card statement. Which of the following are included on that statement? Annual feeAnnual percentage rate for purchasesPenalty feesMethod used to calculate balance
An increasing number of personal bankruptcy filers are baby boomers, who now account for what percent of bankruptcies? 60
Collection agencies are allowed to: contact you as early as 8 am.
In addition to the Consumer Credit Counseling Service (CCCS), the following entities also provide counseling services: UniversitiesCredit unionsMilitary basesState and federal housing authorities
Which of the following methods calculates interest on the full amount of the original principal? Add-on interest method

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