Chapter 6—Using Credit
a.
True
b.
False
True
Moderate
67. The amount of finance charges one pays on a credit card depends only on APR and the amount one charges.
a.
True
b.
False
False
Challenging
68. The intent of the Wage Earner Plan is to provide an alternative to straight bankruptcy.
a.
True
b.
False
True
Challenging
69. A Chapter 13 bankruptcy filing results in the discharge of most of your debts.
a.
True
b.
False
False
70. Families who have a source of income and who want to retain their assets above the protected amount would select
Chapter 13 rather than Chapter 7 bankruptcy.
a.
True
b.
False
True
Challenging
71. The majority of persons filing bankruptcy file Chapter 7 bankruptcy.
a.
True
b.
False
True
Easy
72. The Wage Earner Plan requires debtors to give up most of their assets.
a.
True
b.
False
False
Moderate
Challenging
Chapter 6—Using Credit
73. Before filing for bankruptcy, debtors should consider seeking the help of a credit counselor.
a.
True
b.
False
True
Easy
74. Filing Chapter 7 bankruptcy eliminates one’s obligation to pay past-due alimony and child support payments.
a.
True
b.
False
False
Easy
75. If you initiated the telephone call, it is okay to give your credit card account number when ordering/purchasing from
major catalog houses, airlines, hotels, and so on.
a.
True
b.
False
True
Challenging
Chapter 6—Using Credit
76. If your credit card company increases your interest rate, the new rate can only be applied to new charges, not to
preexisting balances.
a.
True
b.
False
True
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
77. After the Credit Card Act of 2009 was passed, late payments dropped but defaults increased.
a.
True
b.
False
False
Challenging
PFIN.BILL.17.6-1 – LO: 6-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
78. It is not a good idea to use credit
a.
for convenience.
b.
for durable goods.
c.
for consumable items.
d.
to partially finance investments.
e.
to improve one’s credit rating.
c
Moderate
PFIN.BILL.17.6-1 – LO: 6-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
Interest Rates
Bloom’s: Evaluating
Chapter 6—Using Credit
79. It is not a good idea to use credit to
a.
b.
c.
d.
e.
Easy
PFIN.BILL.17.6-1 – LO: 6-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
80. ____ would be an acceptable use of credit.
a.
Purchase of a house
b.
A financial emergency
c.
Shopping convenience
d.
Investing
e.
All of these
e
Moderate
PFIN.BILL.17.6-1 – LO: 6-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Evaluating
81. ____ is a benefit of using credit.
a.
The ability to buy expensive goods while spreading the payments over time
b.
Providing payments that fit into a budget
c.
Having a permanent record of transactions
d.
Being able to purchase goods and services when checks are not acceptable
e.
All of these.
e
PFIN.BILL.17.6-1 – LO: 6-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Chapter 6—Using Credit
Bloom’s: Understanding
82. To establish creditworthiness you probably should first
a.
open savings and checking accounts.
b.
use credit extensively.
c.
arrange a small loan.
d.
pay cash for all purchases.
e.
arrange a large loan from close relatives.
PFIN.BILL.17.6-2 – LO: 6-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
83. ____ would be an indication of overspending.
a.
Having little or no savings
b.
Collection agencies calling you
c.
All of your credit cards charged to their limit
d.
Borrowing to pay for incidentals
e.
All of these
PFIN.BILL.17.6-2 – LO: 6-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Understanding
84. All of the following are useful ways to build a strong credit rating except
a.
Open checking and savings accounts.
b.
Open and use a charge account.
c.
Apply for a long-term loan and occasionally be late with a payment.
d.
Make payments on time.
e.
Talk with the lender if you foresee difficulty in making a payment.
Chapter 6—Using Credit
c
Easy
85. As a percent of take-home pay, monthly consumer credit payments should not exceed
a.
25%.
b.
20%.
c.
15%.
d.
10%.
e.
5%.
Moderate
86. If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly
consumer credit payments should not exceed
a.
$600.
b.
$450.
c.
$400.
d.
$300.
e.
$200.
Challenging
Chapter 6—Using Credit
87. Clare’s gross salary is $36,000 annually and her after-tax income is $28,800. What is Clare’s maximum recommended
monthly consumer credit payment?
a.
$600.
b.
$480.
c.
$450.
d.
$360.
e.
$200.
Challenging
PFIN.BILL.17.6-2 – LO: 6-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Evaluating
88. Open account credit is characterized by
a.
no credit limit.
b.
a monthly credit statement.
c.
annual billing.
d.
minimum balance requirements.
e.
none of the above.
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Analyzing
89. With open account credit, one can often avoid interest charges if
a.
the account balance is paid in full every month.
b.
at least half the account balance is paid every month.
c.
the minimum payment is made every month.
d.
the account is a revolving credit account.
e.
the balance is below the credit limit.
a
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
Chapter 6—Using Credit
90. Mike has a MasterCard with an annual fee of $25, 18% interest, and a $1,000 credit limit. He always pays the total
outstanding balance monthly. His most recent monthly statement lists last month’s payment, new charges this month
totaling $1,500, and a $30 fee. That fee is most likely
a.
the interest charges.
b.
his annual fee.
c.
an over-the-limit fee.
d.
a late-payment fee.
e.
a transaction fee on purchases.
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
91. ____ are not a type of open account credit.
a.
b.
c.
d.
e.
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
92. Interest will almost always begin to accrue immediately when you use a bank credit card to
a.
make purchases.
b.
send payments.
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Analyzing
Chapter 6—Using Credit
c.
compute finance charges.
d.
get a cash advance.
e.
all of these.
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Remembering
93. William uses his bank credit card frequently; however, he always pays off the total balance on the card each month.
What features should William especially look for in a credit card?
a.
Low annual fee and short grace period
b.
Low annual fee and low interest rate
c.
No annual fee and short grace period
d.
No annual fee and long grace period
e.
High annual fee and low interest rate
PFIN.BILL.17.6-5 – LO: 6-5
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
94. Ann Marie accumulated a large balance on her credit card while in college. She is trying to get it paid off as quickly as
possible and wants to roll the balance onto a new credit card. She now uses a credit card only for emergencies. What
should Ann Marie look for in a credit card given the large balance and the way she plans to use the card?
a.
low annual fee
b.
low APR
c.
long grace period
d.
average daily balance method excluding purchases
e.
two-cycle average daily balance method
PFIN.BILL.17.6-5 – LO: 6-5
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Chapter 6—Using Credit
95. Rebate cards work best for those who use the rebates and
a.
charge large amounts on the card.
b.
pay the total card balance off monthly.
c.
carry high monthly balances.
d.
travel internationally
e.
a and b
PFIN.BILL.17.6-5 – LO: 6-5
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
96. Interest rates on ____ are typically lower than on any other form of consumer credit.
a.
reward credit cards
b.
debit cards
c.
credit cards
d.
home equity lines of credit
e.
unsecured personal credit
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Remembering
97. As well as being among the cheapest forms of consumer credit, these offer shelters from taxes:
a.
Automobile loans
b.
Home equity loans
c.
Credit cards
d.
Unsecured personal credit
Bloom’s: Applying
Chapter 6—Using Credit
98. ____ cards offer the cardholder a way to contribute to a worthy cause, sometimes described as “painless
philanthropy.”
a.
Reward
b.
Debit
c.
Credit
d.
Affinity
e.
Rebate
Easy
99. Persons with very poor credit ratings can still get ____ credit cards.
a.
secured
b.
student
c.
prestige
d.
affinity
e.
rebate
a
Moderate
100. Student credit cards typically require that one be enrolled in a 2- or 4-year college/university and
Easy
Chapter 6—Using Credit
a.
a parent’s signature.
b.
own a vehicle.
c.
hold a job.
d.
have some form of income.
e.
take at least nine hours.
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
101. Theresa is a bit of a spendthrift. She has trouble saying no when it comes to buying things. Which of the following
cards would keep her out of debt?
a.
debit
b.
credit
c.
affinity
d.
rebate
e.
prestige
a
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
102. Cards that can be used to pay for selected items with the amount of the transactions automatically subtracted from the
card value are called ____ cards.
a.
debit
b.
credit
c.
affinity
d.
prepaid
e.
prestige
Moderate
PFIN.BILL.17.6-3 – LO: 6-3
Chapter 6—Using Credit
103. The ____ is really a second mortgage on your home.
a.
affinity card
b.
unsecured personal credit line
c.
home equity line of credit
d.
preferred Visa card
e.
platinum American Express card
c
Easy
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Remembering
104. Leon has a home valued at $216,000 and an outstanding mortgage of $140,000. If his lender is willing to provide a
home equity loan of up to 80% of market value, how much could Leon borrow using a home equity loan?
a.
$172,800
b.
$160,000
c.
$76,000
d.
$60,800
e.
$32,800
e
Challenging
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Analyzing
105. Haun and Mei have a home valued at $96,000 and an outstanding mortgage of $50,000. If their lender is willing to
provide a home equity loan of up to 85% of market value, how much could they borrow using a home equity loan?
a.
$14,400
b.
$31,600
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
Chapter 6—Using Credit
c.
$36,800
d.
$46,000
e.
$81,600
Challenging
PFIN.BILL.17.6-3 – LO: 6-3
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Evaluating
106. A problem with home equity loans is the
a.
high rate of interest on these loans.
b.
difficulty in qualifying for these loans.
c.
short-term nature of these loans.
d.
temptation to spread payments over a long term.
e.
tax disadvantages of these loans.
Moderate
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Evaluating
107. The lender uses a credit application to determine whether the borrower has the ____ to handle the debt.
a.
character and confidence
b.
confidence and capacity
c.
acumen and capacity
d.
character and capacity
e.
credit and character
Moderate
PFIN.BILL.17.6-4 – LO: 6-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – KS – DISC: Financial Markets and Inte – DISC: Financial Markets and
Chapter 6—Using Credit
108. The quality of your credit rating is maintained by
a.
only using cash to make purchases.
b.
making credit payments early.
c.
seldom questioning billing errors.
d.
using multiple credit cards.
e.
meeting credit obligations as contracts require.
e
Moderate
PFIN.BILL.17.6-4 – LO: 6-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Applying
109. A ____ is an agency that provides credit information about individual borrowers to lenders.
a.
credit bureau
b.
consumer bureau
c.
credit statement
d.
bank
e.
credit scoring house
a
Easy
PFIN.BILL.17.6-4 – LO: 6-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Interest Rates
Bloom’s: Remembering
110. If the information on your credit report is in dispute, you are entitled to
a.
correct it.
b.
sue.
c.
erase it.
d.
supply your own explanation about the dispute.
e.
withdraw from the credit bureau.
Interest Rates
Bloom’s: Applying