99. Which of the following is not part of the evaluation of an installment loan?
A) The borrower’s track record in caring for and maintaining property
B) Evidence of stable employment
C) Evidence of residence stability
D) Evidence of income stability
E) All of the above are part of the evaluation of an installment loan
100. Which of the following is an advantage of a credit scoring model?
A) Credit scoring models rely on the evaluation of an experienced credit officer
B) Credit scoring models are immune from charges of discrimination
C) Credit scoring models never make mistakes
D) Credit scoring models can handle a large volume of applications in a short period of time
E) All of the above are advantages of credit scoring models
101. When interest owed on a loan is added to the principal amount of the loan to determine a
borrowing customer’s required installment payments, this is known as the _________method for
figuring a customer’s loan rate. Fill in the blank with an appropriate response below.
A) Simple interest
B) APR
C) Discount
D) Add-on
E) None of the above
102. The symbols ARM in lending means:
A) Automatic rate modulation
B) Amortization rate method
C) Adjustable rate mortgage
D) Adaptable readjusted mortgage
E) None of the above.
103. The charge on a home mortgage loan that a borrower may be asked to pay up front is referred to
as:
A) Loan Interest Owed
B) Points
C) Loading
D) Tax equity
E) None of the above.
104. Which of the following has the highest interest rate according to the book?
A) New automobile loan
B) Used automobile loan
C) Personal loan
D) Credit card loan
E) All of these have the same interest rate
105. Which of the following has the lowest interest rate according to the book?
A) New automobile loan
B) Used automobile loan
C) Personal loan
D) Credit card loan
E) All of these have the same interest rate
106. A customer seeks a $150,000 home mortgage. The bank requires the customer to pay 1 ¾ points
up front. How much of the loan is actually available to the customer?
A) $150,000
B) $152,625
C) $147,375
D) $148,000
E) None of the above
107. A customer wants to borrow $1200 from Edmond State Bank. Edmond State Bank has an add-on
loan with an interest rate of 12 percent and monthly payments for one year. What are the
monthly payments this customer will need to make on this loan?
A) $100 per month
B) $112 per month
C) $107 per month
D) $88 per month
E) None of the above
108. A customer wants to borrower $25,000 for one year. TRC State Bank has a discount loan with an
interest rate of 15 percent. How much of the loan will be available to the customer?
A) $25,000
B) $28,750
C) $22,500
D) $21,250
E) None of the above
109. A customer wants to borrow $125,000 to purchase a new home. The APR on this loan is 10
percent and it is a 30-year mortgage with monthly payments. What monthly payment will this
customer face on this loan?
A) $1097
B) $55
C) $12,500
D) $13,260
E) None of the above
110. Mark Brown receives a $2000 loan with the intention of repaying the loan in 12 months.
However, at the end of one month, Mr. Brown discovers he can repay the loan in full. What
percentage of the interest charge is Mr. Brown entitled to receive as a rebate?
A) 36.67 percent
B) 50.00 percent
C) 91.67 percent
D) 63.33 percent
E) None of the above
111. Paul Carter requests an automobile loan of $15,000 that will be repaid over the next four years in
monthly repayments. The First National Bank tells Mr. Carter that his total finance charges will
be $4675.20. What is the APR on this loan?
A) 16 percent
B) 1 percent
C) 14 percent
D) 7 percent
E) None of the above
112. Jane Smith has asked for a 30 year mortgage to purchase a home in Oklahoma City, Oklahoma.
The purchase price of the home is $150,000 of which $125,000 must be borrowed. If the APR on
this loan is 8 percent, how much will Jane’s total financing charges be?
A) $246,233
B) $205,194
C) $180,194
D) $165,097
E) None of the above
113. Beverly Frickerson asks for a $15,000 loan for one year. The bank tells her that they will give
her $13,050 immediately and deduct $1950 in interest up front. What is the effective rate of
interest on this loan?
A) 14.94 percent
B) 13.00 percent
C) 19.50 percent
D) 11.50 percent
E) None of the above
114. The largest credit card lender (as a group) in the U.S. are:
A) Thrifts
B) Insurance companies
C) Finance companies
D) Oil companies
115. Prepaid cards which compete with credit cards and debit cards are:
A) Smart cards
B) Deposit cards
C) Match cards
D) All of the above
E) None of the above
116. The first major bank within the U.S. to establish a separate department for granting household
loans was:
A) First National City Bank of New York
B) BankAmerica
C) Bank One
D) State Street Bank
E) Bank of New York
117. The fastest growing consumer loan category is:
A) Credit card loans
B) Auto loans
C) Home mortgages
D) Personal loans
E) Education loans
118. The very popular FICO credit scoring system provides credit scores in the range:
A) 0 to 10
B) 0 to 1000
C) 100 to 1000
D) 300 to 850
E) 20 to 80
119. The most important factor used in the FICO credit scoring system is:
A) The borrower’s payment history
B) The amount of money owed
C) Marital status
D) Employment history and salary
E) Age
120. Jeremiah Uselton needs a loan to purchase a condo in Sarasota, Florida. What type of loan does
Jeremiah need?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
121. Tammy Payne wants to buy a used car and wants a loan that she will pay off over the next three
years with monthly payments. What type of loan does Tammy want?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
122. Emily Barnes has gone to the First State Bank and gotten a loan of $5000 so she can go on
vacation. She plans on paying the loan back in one payment in three months. What type of loan
has Emily gotten?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
123. Bill Wells uses his Discover card to buy new furniture for his apartment. The interest rate on this
card is 18% and the minimum payment that is due is $100. What type of loan has Bill gotten?
A) Residential mortgage loan
B) Installment loan
C) Noninstallment loan
D) Revolving line of credit
E) None of the above
124. Jerry McGuire uses his Visa card to buy a new washer and dryer and a new refrigerator for his
home. He plans on paying off the credit card over the next two years. How is Jerry using his
credit card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
125. The most profitable credit card customers for a bank are those that:
A) Use their credit card frequently
B) Pay off any charges incurred within a few days
C) Charge at least $10,000 per year
D) Use their credit card as a source of installment loans
E) None of the above
126. Alexis Downs uses her credit card to buy furniture but pays off the credit card at the end of the
month before she incurs any interest costs. How is Alexis using her credit card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
127. Donna Carlon is using her plastic card to buy groceries. The money is taken from her checking
account immediately to pay for her groceries. How is Donna using her card?
A) As an installment loan
B) As a noninstallment loan
C) As a lump sum payer
D) As a debit card
E) None of the above
128. A bank is considering making a loan to Alice Granger. The bank is looking at her credit report
from Equifax and also examining the reason Alice has put on the loan application for needing the
loan? What aspect of evaluating a consumer loan application is the bank looking at?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
129. A bank is considering making a loan to Ron Weasley. Ron has a gross salary per month of $4000
but has take-home pay of $2800 per month. What aspect of evaluating a consumer loan
application is this fact most concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
130. A bank is considering making a loan to Sean Finnigan. Sean owns his own home and has lived
there for the past four years. What aspect of evaluating a consumer loan application is this fact
most concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
131. A bank is considering making a loan to Sam Snape. Mr. Snape has $1000 in the bank right now
but generally keeps a balance of $4500 most of the year. What aspect of evaluating a consumer
loan application is this fact concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
132. A bank is considering making a loan to Neville Langdon. Neville has bounced three checks in
the last year and already has $10,000 on a credit card and an automobile loan with a large
balance. What aspect of evaluating a consumer loan application is this fact concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
133. A bank is considering making a loan to John Carter. John is a commissioned sales broker. Some
months he earns as much as $10,000 and in other months he earns virtually nothing. Which
aspect of evaluating a consumer loan would this be concerned with?
A) Character and purpose
B) Income level
C) Deposit balance
D) Employment and residential stability
E) Pyramiding of debt
134. Which of the following is a challenge of making a consumer loan?
A) Audited financial statements are provided by consumers quarterly
B) Consumers must disclose publicly any changes in their health that would affect the loan
C) Consumers can more easily hide pertinent information
D) Consumers can more easily adjust to financial setbacks than can businesses
E) All of the above are challenges of making a consumer loan
135. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000
but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local
bank requires him to put down 10% of the purchase price after the value of the trade-in is
considered. Mark also knows that bank will charge 8% for the loan and require monthly
payments over the next 4 years. What is the minimum down payment that Mark can make?
A) $2,100
B) $450
C) $1,650
D) $2,550
E) None of the above
136. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000
but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local
bank requires him to put down 10% of the purchase price after the value of the trade-in is
considered. Mark also knows that bank will charge 8% for the loan and require monthly
payments over the next 4 years. If Mark makes the minimum down payment on the car, what is
the amount of the loan that Mark will receive?
A) $18,900
B) $14,850
C) $16,500
D) $14,400
E) None of the above
137. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000
but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local
bank requires him to put down 10% of the purchase price after the value of the trade-in is
considered. Mark also knows that bank will charge 8% for the loan and require monthly
payments over the next 4 years. What is the size of Mark’s monthly payments if he makes the
minimum down payment on the car?
A) $353.50
B) $301.67
C) $512.67
D) $402.81
E) None of the above
138. Mark Green is considering buying a new Honda Accord. The purchase price of the car is $21,000
but Mark has a trade-in worth $4500. Mark needs a loan to buy the car and knows that his local
bank requires him to put down 10% of the purchase price after the value of the trade-in is
considered. Mark also knows that bank will charge 8% for the loan and require monthly
payments over the next 4 years. Mark’s monthly payments are 353.50 per month. What is
Mark’s total finance charge if he takes the full 4 years to pay off the loan?
A) $468
B) $4,032
C) $4,500
D) $2,488
E) None of the above
139. The Equal Credit Opportunity Act requires that:
A) A bank make loans to all minority applicants
B) A bank only make loans to white male applicants
C) A bank give reasons in writing for denying the loan
D) A bank deny loans if the borrower has only been employed for three months
E) None of the above
140. Credit reports provided by credit bureaus provide lenders:
A) With personal identifying data
B) With personal credit histories derived from data submitted by lenders
C) With public information that may bear on a borrower’s honesty and stability
D) With the volume of inquiries from lenders about the borrower
E) All of the above
141. Which regulation requires out-of-state-banks that acquire local banks to commit to continued
lending in the area and not use the acquired banks simply as deposit gatherers?
A) Equal Credit Opportunity Act
B) National Bank Act
C) Federal Lending Act
D) Fair Credit Reporting Act
E) Community Reinvestment Act
142. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments.
If the loan is a discount loan, what is the monthly payment?
A) 200.00
B) $192.35
C) $184.20
D) $173.12
E) $166.67
143. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments.
If the loan quoted has an add-on rate, what are the net proceeds of the loan?
A) $2,200
B) $2,100
C) $2,000
D) $1.800
E) Cannot be determined
144. A bank customer is granted credit for a $2,000 loan at 10% to be repaid in 12 equal installments.
If the loan quoted has an add-on rate, what is the approximate annual percentage rate (APR) on
the loan?
A) 20%
B) 18%
C) 14%
D) 12%
E) 10%
145. As part of the new regulations of the mortgage market, the Federal Reserve Board moved to
tighten the rules on mortgage lending in 2008. All of the following would improve transparency
of the market except for:
A) Lenders must verify the borrower’s reported income
B) Lenders cannot rely on a home’s current market value to judge a borrower’s creditworthiness
C) Lenders must rely on a borrower’s stated income
D) Lenders must disclose more about the actual terms of a home mortgage loan to a borrower
E) All of the above are included in the new rules