Finance Chapter 6 Quiz

Credit is an arrangement to receive cash, goods, or services now and pay for them in the future True
Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals True
Consumer credit is based on trust in people’s ability and willingness to pay bills when due True
Consumer credit dates back to colonial time True
Most economists do not recognize consumer credit as a major force in the American economy False
“Shopaholics” and young adults are most vulnerable to misusing credit True
College students are not a prime target for credit card issuers False
Credit when effectively used, can help you have more and enjoy more True
It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash True
Perhaps the greatest disadvantage of using credit is the temptation to overspend True
Although credit allows more immediate satisfactory of needs and desires, it does not increase total purchasing power True
With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts. False
In a closed-end credit, loans are made on a continuous basis and you make at least partial paymen False
Closed-end in credit is used for a specific purpose and involves a specified amount True
In a closed-end credit, generally the seller holds title to the merchandise until the payments have been completed True
Consumer credit: dates back to colonial times.
When did installment credit explode on the American scene? with the advent of the automobile in the early 1900s
The baby boom generation currently represents about 30 percent of the population but holds nearly ____________ percent of the debt outstanding. 60
Although credit permits more immediate satisfaction of needs and desires, it: does not increase total purchasing power.
By paying cash for a purchase, you: forgo the opportunity to keep the cash in an interest-bearing account.
Another name for closed-end credit is: installment credit.
Kathy purchased a $2,000 digital TV from Young’s Appliances. She will make 12 equal payments over the next year to pay for it. She is using: closed-end credit
A good example of a closed-end credit is: a mortgage loan.
Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of: closed-end credit.
Another name for open-end credit is: revolving credit.
The maximum amount of credit you are allowed by a creditor is called a(n): line of credit.
A good example of an open-end credit is: the use of a bank credit card to make a purchase.
Installment sales credit is a: loan that allows you to receive merchandise such as a refrigerator or furniture.
Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of: a line of credit
Installment cash credit is a: direct loan of money for personal purposes.
Revolving check credit is a: prearranged loan for a specified amount that you can use by writing a special check.
The debit card: debits your account at the moment you buy goods or services.
In determining your credit capacity, you first provide for basic necessities, such as: mortgage or rent.
Experts suggest that you spend no more than ____________ percent of your net income on credit purchases. 20
Michael purchases a laptop computer from Best Buy. He will make one big payment without paying any interest as long as he pays it on or before August 15. This is an example of: single lump-sum credit
If you cosign a loan: you’ll have to pay up to the full amount of the debt if the borrower does not pay.
Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity? Credit Bureau
If your monthly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments? $300
What would be the maximum limit for an individual’s debt-to-equity ratio, excluding the home mortgage? 1.00
Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file? the Fair Credit Reporting Act of 1971

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