Test Bank 13e Chapter.6 Introduction to Consumer Credit - Personal Finance 13e Answer Key + Test Bank by Jack Kapoor. DOCX document preview.
Personal Finance, 13e (Kapoor)
Chapter 6 Introduction to Consumer Credit
1) Credit is an arrangement to receive cash, goods, or services now and pay for them in the future.
Difficulty: 1 Easy
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
2) Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals and families.
Difficulty: 1 Easy
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
3) Consumer credit is based on trust in people's ability and willingness to pay bills when due.
Difficulty: 1 Easy
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
4) Consumer credit dates back to colonial times.
Difficulty: 1 Easy
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
5) All economists do not recognize consumer credit as a major force in the American economy.
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
6) "Shopaholics" and young adults are most vulnerable to misusing credit.
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
7) College students are not a prime target for credit card issuers.
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
8) Credit, when effectively used, can help you have more and enjoy more.
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
9) It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying a large amount of cash.
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
10) Perhaps the greatest disadvantage of using credit is the temptation to overspend.
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
11) Although credit allows more immediate satisfaction of needs and desires, it does not increase total purchasing power.
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
12) With open-end credit, you pay back one-time loans in a specified period of time in payments of equal amounts.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
13) With closed-end credit, loans are made on a continuous basis and you are billed periodically for at least a partial payment.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
14) Closed-end credit is used for a specific purpose and involves a specified amount.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
15) With closed-end credit, generally the seller holds the title to the merchandise until the payments have been completed.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
16) Installment sales credit is a loan that allows you to receive high-priced items, such as large appliances or furniture.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
17) Installment cash credit is a direct loan of money for personal purposes, home improvements, or vacation expenses.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
18) Single lump-sum credit is a loan that must be repaid in total on a specified day, usually within 30 to 90 days.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
19) Using a bank credit card, such as Visa or MasterCard, is an example of closed-end credit.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
20) Interest is a periodic charge for the use of credit.
Difficulty: 1 Easy
Topic: Cost of credit - rates and fees
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
21) The credit cardholders who pay off their balances in full each month are known as convenience users.
Difficulty: 1 Easy
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
22) Debit cards are often called bank cards, ATM cards, cash cards, and check cards.
Difficulty: 1 Easy
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
23) If your debit card is lost or stolen, you must work directly with the issuer.
Difficulty: 1 Easy
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
24) To protect yourself against credit card fraud, you should shred anything with your account number on it before throwing it away.
Difficulty: 1 Easy
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
25) Department stores and gasoline companies are good places to obtain your first credit card.
Difficulty: 1 Easy
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
26) A home equity loan is usually set up as a revolving line of credit, typically with a fixed interest rate.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
27) With a revolving line of credit, borrowings are permitted up to a specified limit and for a stated period, usually 5 to 10 years.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
28) The debt payments-to-income ratio is calculated by dividing your total liabilities by your net worth.
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
29) The debt-to-equity ratio is calculated by dividing your monthly debt payments by your net worth.
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
30) The smaller the debt-to-equity ratio, the riskier the situation is for lenders and borrowers.
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
31) The larger the debt-to-equity ratio, the riskier the situation is for lenders and borrowers.
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
32) When you cosign a loan, you are being asked to guarantee this debt.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
33) A lender requires a cosigner even when a borrower meets the lender's criteria for making a loan.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
34) If you cosign a loan, the creditor can collect this debt from you without first trying to collect from the borrower.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
35) If you cosign a loan and the debt is not paid off, then this fact does not become a part of your credit record.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
36) The Consumer Financial Protection Bureau receives more consumer complaints about credit bureaus than about any other industry.
Difficulty: 1 Easy
Topic: Consumer credit - complaints
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
37) The accuracy of credit reports has worsened recently.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
38) The Fair Credit Reporting Act, which regulates the use of credit reports, requires the deletion of obsolete information and gives consumers access to their files.
Difficulty: 1 Easy
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
39) Credit bureaus obtain their data from banks, finance companies, merchants, credit card companies, other creditors, and court records.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
40) Your friends and neighbors can get credit information about you.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
41) Most of the information in your credit file may be reported for only seven years. However, if you have declared personal bankruptcy, then this fact may be reported for 10 years.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
42) The Equal Credit Opportunity Act is very specific about how a person's age may be used in credit decisions.
Difficulty: 1 Easy
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
43) In the 5 Cs of credit, capacity refers to the borrower's attitude toward his or her credit obligations.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
44) In the 5 Cs of credit, character refers to the borrower's attitude toward his or her credit obligations.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
45) In the 5 Cs of credit, capacity refers to the borrower's financial ability to meet credit obligations.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
46) In the 5 Cs of credit, capital refers to your assets or net worth.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
47) In the 5 Cs of credit, capital refers to your financial ability to meet credit obligations.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
48) In the 5 Cs of credit, collateral is an asset that you pledge to a financial institution to obtain a loan.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
49) In the 5 Cs of credit, conditions refers to general economic conditions that can affect your ability to repay a loan.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
50) A creditor may ignore your retirement income in rating your application.
Difficulty: 1 Easy
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
51) You may not be denied credit because you receive Social Security or public assistance.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
52) The Fair Credit Billing Act sets the procedures for promptly correcting billing mistakes/errors.
Difficulty: 1 Easy
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
53) The Fair Credit Billing Act has a provision in which a lender can threaten your credit rating while you are resolving a billing dispute.
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
54) When imposters take your name, they are committing a crime.
Difficulty: 1 Easy
Topic: Stolen identity
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
55) If someone has stolen your identity, the Federal Trade Commission recommends that you contact the fraud departments of each of the three major credit bureaus.
Difficulty: 2 Medium
Topic: Stolen identity
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
56) A home equity loan is based on the difference between the current market value of your home and the amount you still owe on your mortgage.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
57) Consumer credit:
A) is currently a privilege of the affluent.
B) dates back to colonial times.
C) currently carries no finance charge.
D) is not a major force in our economy.
E) use has been declining in recent years.
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
58) When did installment credit explode on the American scene?
A) With the advent of the automobile in the early 1900s
B) With the advent of television in the late 1940s
C) Just after World War II
D) During the recession of the 1950s
E) During the inflation of the 1970s
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
59) The baby boom generation currently represents about 30 percent of the population but holds nearly ________ percent of the outstanding debt.
A) 80
B) 70
C) 60
D) 50
E) 40
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
60) One common type of closed-end credit is:
A) a line of credit.
B) convenience credit.
C) revolving credit.
D) installment cash credit.
E) bank card credit.
Difficulty: 1 Easy
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
61) One example of closed-end credit is:
A) a credit card issued by a department store.
B) a credit card issued by VISA or MasterCard.
C) the use of overdraft protection at a bank.
D) the use of a Travel and Entertainment card.
E) a mortgage loan.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
62) Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of:
A) a line of credit.
B) a credit card loan.
C) open-end credit.
D) closed-end credit.
E) convenience credit.
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
63) Many banks extend a bank line of credit, which is also called:
A) revolving check credit.
B) a box of credit.
C) convenience credit.
D) installment credit.
E) single lump-sum credit.
Difficulty: 1 Easy
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
64) The maximum dollar amount of credit the lender has made available to you is called:
A) revolving credit.
B) line of credit.
C) convenience credit.
D) installment cash credit.
E) single lump-sum credit.
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
65) An example of open-end credit is:
A) the use of a bank credit card to make a purchase.
B) a mortgage loan from a savings and loan institution.
C) an automobile loan from a credit union.
D) an installment loan from a furniture store.
E) an installment loan for purchasing a major appliance.
Difficulty: 2 Medium
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
66) Installment sales credit is a:
A) direct loan of money for personal purposes.
B) direct loan of money for home improvement.
C) loan that allows you to receive merchandise such as large appliances or furniture.
D) direct loan for vacation purposes.
E) synonym for a single lump-sum credit.
Difficulty: 3 Hard
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
67) Which of the following is a prearranged loan for a specified amount that you can use by writing a special check?
A) Incidental credit
B) Closed-end credit
C) A bank line of credit
D) Installment sales credit
E) Overdraft protection
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
68) Installment cash credit is a:
A) loan that must be repaid in total on a specified day.
B) direct loan of money for personal purposes.
C) loan that allows the consumer to receive merchandise, such as a refrigerator.
D) down payment made on a purchase.
E) synonym for single lump-sum credit.
Difficulty: 1 Easy
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
69) A credit arrangement that has no extra costs and no specific repayment plan is called:
A) installment sales credit.
B) single lump-sum credit.
C) line of credit.
D) incidental credit.
E) revolving check credit.
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
70) Revolving check credit is a:
A) credit arrangement that has no extra costs.
B) prearranged loan for a specified amount that you can use by writing a special check.
C) credit arrangement that has no specific repayment plan.
D) synonym for installment cash credit.
E) synonym for single lump-sum credit.
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
71) A debit card:
A) decreases your account at the moment you buy goods or services.
B) extends credit and delays your payment.
C) is a new type of a credit card issued by VISA International.
D) is another name for a travel and entertainment card.
E) typically has a credit limit of $1,000.
Difficulty: 3 Hard
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
72) In determining your credit capacity, you first provide for basic necessities within your budget, such as:
A) furniture.
B) home furnishings.
C) mortgage or rent.
D) automobile.
E) durable goods.
Difficulty: 1 Easy
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
73) Experts suggest that you spend no more than ________ percent of your net income (after-tax) on consumer credit payments.
A) 10
B) 20
C) 30
D) 40
E) 50
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
74) Today, Michael purchased a laptop computer from a retail outlet. He has agreed to pay for this purchase in full 30 days from today. This is an example of:
A) open-end credit.
B) mortgage loan.
C) single lump-sum credit.
D) installment cash credit.
E) revolving check credit.
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
75) If you cosign a loan:
A) you are only responsible for half of the debt obligation.
B) you will be asked, but not required, to pay the loan in full if the borrower fails to pay.
C) you will be required to pay the loan in full if the borrower does not pay.
D) the creditor must first try to collect from the borrower.
E) the creditor is prohibited from garnishing your wages if you refuse to pay the loan in full.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
76) Which one of the following agencies maintains data about the amount and terms of your credit and your paying habits?
A) Federal Reserve Bank in your district
B) Consumer sentinel network
C) Federal Trade Commission
D) Public assistance office
E) Credit bureau
Difficulty: 2 Medium
Topic: Credit bureaus
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
77) If your monthly net income is $1,250, what should be your maximum amount spent on credit payments?
A) $125
B) $250
C) $375
D) $500
E) $600
Explanation: $1,250 × 20% = $250.
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
78) What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage?
A) 0.50
B) 0.33
C) 1.00
D) 2.00
E) 2.25
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
79) What can be included in your credit bureau file?
A) Race
B) Nationality
C) Sex
D) Marital status
E) Religion
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
80) Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives consumers access to their file?
A) Truth in Lending Act of 1969
B) Fair Credit Billing Act of 1975
C) Equal Credit Opportunity Act of 1975
D) Fair Credit Reporting Act of 1971
E) Fair Debit Collection Practices Act of 1978
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
81) Most of the information in your credit file may be reported for only ________ years.
A) 7
B) 9
C) 11
D) 13
E) 15
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
82) If you dispute the accuracy of information in your credit file:
A) you should sue the credit bureau.
B) the credit bureau has no power to change it.
C) the credit bureau must reinvestigate and modify or remove inaccurate data.
D) you must wait at least six months prior to launching an investigation.
E) you have no means of correcting it.
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
83) An unauthorized person who obtains a credit report under false pretenses may be:
A) sued by the lender.
B) sued by the borrower.
C) jailed for 5 years.
D) subject to a fine and imprisonment.
E) placed on a probation.
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
84) The debt payments-to-income ratio is:
A) calculated by dividing total liabilities by net worth.
B) calculated by dividing monthly debt payments (excluding mortgage payments) by net monthly income.
C) determined by dividing your assets by your liabilities.
D) a useless ratio for determining your credit capacity.
E) rarely used by creditors in determining credit worthiness.
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
85) The debt-to-equity ratio is:
A) calculated by dividing total liabilities by net worth.
B) calculated by dividing monthly debt payments by net monthly income.
C) determined by dividing your assets by your liabilities.
D) a useless ratio for determining your credit capacity.
E) rarely used by creditors in determining credit worthiness.
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
86) Dave's net take-home pay per month is $2,100. What is the maximum dollar amount of debt payments, excluding a home mortgage, he should have?
A) $840
B) $420
C) $315
D) $210
E) $0
Explanation: $2,100 × 20% = $420.
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
87) Which one of the following is not a source that provides data to credit bureaus?
A) Banks
B) Finance companies
C) Credit card companies
D) Court records
E) Internal Revenue Service
Difficulty: 2 Medium
Topic: Credit bureaus
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
88) If you have declared personal bankruptcy, then this fact may be reported by credit bureaus for ________ years.
A) 5
B) 10
C) 15
D) 20
E) 25
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
89) If you have incorrect information in your credit file:
A) you can't really do much about it.
B) you have no legal remedies.
C) credit bureaus are not required to change it.
D) there are legal remedies available to you.
E) don't worry because it will not affect your ability to borrow money.
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
90) If you are denied credit, your first step should be to:
A) increase your income and decrease your spending.
B) reapply for credit.
C) hire an attorney and file a suit against the creditor.
D) check your credit file at the credit bureau.
E) sue the credit bureau that provided the negative information.
Difficulty: 3 Hard
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
91) Which federal consumer credit law starts all credit applicants off on the same footing with factors that may not be used to discriminate against you?
A) Fair Credit Reporting Act
B) Truth in Lending Act
C) Fair Credit Billing Act
D) Fair Debt Collection Practices Act
E) Equal Credit Opportunity Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
92) The credit bureau cannot charge you a fee for a copy of your credit report if you request it within ________ days of being denied credit based on the information in the credit report.
A) 10
B) 20
C) 30
D) 40
E) 60
Difficulty: 1 Easy
Topic: Credit bureaus
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
93) The borrower's attitude toward his or her credit obligations is called:
A) capacity.
B) capital.
C) character.
D) collateral.
E) conditions.
Difficulty: 1 Easy
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
94) A bank that is looking at your past payment records on your loans is most likely examining which aspect of the 5 Cs of lending?
A) Character
B) Capacity
C) Collateral
D) Capital
E) Conditions
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
95) The borrower's financial ability to meet credit obligations is called:
A) capacity.
B) character.
C) capital.
D) collateral.
E) conditions.
Difficulty: 1 Easy
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
96) A term that refers to the borrower's assets or net worth is called:
A) capacity.
B) character.
C) capital.
D) collateral.
E) conditions.
Difficulty: 1 Easy
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
97) A valuable asset pledged to obtain a loan and subject to repossession upon default to satisfy the debt is called:
A) capacity.
B) character.
C) capital.
D) collateral.
E) conditions.
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
98) A loan officer is examining your income and the amount of your existing debt payments and monthly expenses in deciding whether to make a loan to you today. Which aspect of the 5 Cs of lending is the loan officer most likely looking at?
A) Character
B) Capacity
C) Capital
D) Collateral
E) Conditions
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember; Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
99) In evaluating your credit application, a lender may:
A) ask your age.
B) deny you credit if you are on public assistance.
C) require your parent's address.
D) decrease your credit because of your age.
E) discriminate against your race and nationality.
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
100) If your credit application is denied, you:
A) should sue the credit rating agency.
B) should file a complaint against the merchant.
C) have no legal right to know why.
D) are entitled to know the specific reason you were denied credit.
E) can reapply for credit after six months.
Difficulty: 1 Easy
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
101) If you have a problem with your credit account, the best solution is to:
A) file a lawsuit against the creditor.
B) first call your creditor.
C) complain to the Federal Reserve System.
D) complain to the Board of Governors.
E) wait for creditor action.
Difficulty: 3 Hard
Topic: Consumer credit - complaints
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
102) Which federal credit law sets the procedure for promptly correcting billing mistakes?
A) Fair Debt Collection Practices Act
B) Equal Credit Opportunity Act
C) Fair Credit Billing Act
D) Fair Credit Reporting Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
103) The best way to maintain your credit standing is to:
A) use credit sparingly.
B) pay cash for your purchases.
C) repay your debts on time.
D) declare a Chapter 7 bankruptcy.
E) use as many credit cards as you can.
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
104) If you think that your bill is wrong, you should first:
A) contact the local credit bureau and inform it of the billing error.
B) complain to the Better Business Bureau.
C) contact your state consumer protection agency.
D) call the creditor to discuss the error.
E) contact your attorney to settle the matter.
Difficulty: 3 Hard
Topic: Billing errors and corrections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
105) Which federal credit law protects you against an unauthorized use of your credit card?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
106) When you complain about your billing error, the creditor must acknowledge your letter within ________ days.
A) 10
B) 20
C) 30
D) 60
E) 90
Difficulty: 2 Medium
Topic: Billing errors and corrections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
107) When resolving a billing dispute, a creditor must either tell you why the bill is correct or:
A) correct your account within two billing periods.
B) send this information to a credit bureau.
C) require you to pay the bill in full and then credit your account if the error is found.
D) start the collection process.
E) demand that you surrender your credit card.
Difficulty: 2 Medium
Topic: Billing errors and corrections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
108) What should you do if your identity is stolen?
A) File a police report.
B) Ignore the problem and hope that it will go away.
C) Close all of your accounts and do not say anything to anyone.
D) Pay all the charges for which you are billed, even if they are not yours, so you can keep your credit accounts.
E) Complain to your friends.
Difficulty: 2 Medium
Topic: Stolen identity
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
109) If you have a complaint about consumer credit, you should first:
A) try to solve your problem directly with the creditor.
B) contact your attorney.
C) file a complaint with the Better Business Bureau.
D) report it to the state consumer protection agency.
E) complain to the Federal Reserve Bank in your district.
Difficulty: 2 Medium
Topic: Consumer credit - complaints
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
110) Which federal consumer credit law places the burden of proof for accurate credit information on the credit reporting agency rather than on the consumer?
A) Consumer Credit Reporting Reform Act
B) Truth in Lending Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
111) Which federal consumer credit law provides specific cost disclosure requirements for the annual percentage rate and the finance charges as a dollar amount?
A) Fair Debt Collection Practice Act
B) Equal Credit Opportunity Act
C) Fair Credit Billing Act
D) Fair Credit Reporting Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
112) Which federal consumer credit law prohibits credit discrimination based on sex and marital status?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.; 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
113) Which federal consumer credit law regulates the advertising of credit terms?
A) Fair Debt Collection Practices Act
B) Equal Credit Opportunity Act
C) Fair Credit Billing Act
D) Fair Credit Reporting Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
114) If you have a complaint about a bank in connection with any of the federal credit laws, who should you contact?
A) National Credit Union Association
B) Federal Trade Commission
C) Federal Reserve System
D) Comptroller of the Currency
E) Bank Vice-President
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
115) Which federal consumer credit law prohibits creditors from requiring women to reapply for credit upon a change in marital status?
A) Fair Debt Collection Practices Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Credit Reporting Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
116) Which federal consumer credit law prohibits abusive, deceptive, and unfair practices by debt collectors?
A) Fair Credit Billing Act
B) Fair Debt Collection Practices Act
C) Equal Credit Opportunity Act
D) Fair Credit Reporting Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
117) Which federal consumer credit law prohibits credit card issuers from sending unrequested cards?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
118) Which federal consumer credit law limits a cardholder's liability for unauthorized use of a card to $50?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
119) Which federal consumer credit law requires credit reporting agencies to send the consumer's version of a disputed item to certain businesses or creditors?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
120) Which federal consumer credit law allows consumers to withhold payment for faulty or defective goods or services when purchased with a credit card?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
121) Which federal consumer credit law requires creditors to inform applicants of acceptance or rejection of their credit application within 30 days of receiving a completed application?
A) Truth in Lending Act
B) Fair Credit Reporting Act
C) Fair Credit Billing Act
D) Equal Credit Opportunity Act
E) Fair Debt Collection Practices Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
122) Which of the following is most likely not a valid reason for using credit?
A) Borrowing for an emergency stay in a hospital
B) Borrowing to purchase a car so that a homemaker can return to the workforce
C) Borrowing to buy a printer for your home office now because you know it will be twice as expensive later
D) Borrowing to pay for your expensive dinner and movie every week
E) Borrowing to pay for a college education
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
123) Which one of the following is an advantage of using credit?
A) Potential bankruptcy
B) Spending beyond your budget
C) Providing help in emergencies
D) Committing future income to pay for current purchases
E) Incurring interest charges
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
124) Which one of the following is a disadvantage of using credit?
A) Receiving advance notice of sales
B) Temptation to overspend
C) Avoiding the necessity of carrying cash
D) Ease of returning merchandise
E) Paying for several purchases with one monthly payment
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
125) Jake Smith purchases a big screen TV on credit and will repay the loan with one payment at the end of 90 days. What type of credit did Jake use?
A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Revolving check credit
E) Open-end credit
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
126) Jennifer Gardner purchases a sofa, love seat and reclining chair for her family room. She made a down payment and will make payments of $65 per month for the next twenty-four months. What type of credit did Jennifer use?
A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Revolving check credit
E) Open-end credit
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
127) Larry Arnold gets a direct loan of money to go on vacation with his family. There is no down payment, and he will repay the loan over the next twelve months. What type of credit did Larry use?
A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Revolving check credit
E) Incidental credit
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
128) Gordon Carey uses his Visa card to purchase a new digital camera and lens. What type of credit did Gordon use?
A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Open-end credit
E) Closed-end credit
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
129) Jim Roy visits the doctor for his annual check-up which costs $85. He is billed for this at the end of the month. What type of credit did Jim use?
A) Installment sales credit
B) Installment cash credit
C) Single lump-sum credit
D) Closed-end credit
E) Incidental credit
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
130) Which one of the following is important to do to help avoid credit card fraud?
A) If you do not receive your billing statement, notify the company immediately
B) Give out your credit card number over the phone
C) Write your credit card number on the outside of envelopes
D) Leave your credit card lying around anywhere
E) If your billing statement is incorrect, ignore it
Difficulty: 1 Easy
Topic: Fraud prevention
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
131) What should you do when you shop online using your credit card?
A) Delete immediately all records of your transactions
B) Use a secure browser
C) Give out your private information to anyone who requests it online
D) Make sure to open and download all files sent you by strangers
E) Give your password to anyone who requests it
Difficulty: 1 Easy
Topic: Fraud prevention
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
132) Robert Smith has monthly net income of $1,200. He has a house payment of $550 per month, a car loan with payments of $250 per month, a Visa card with payments of $40 per month, and a credit card with a local department store with payments of $58 per month. What is Robert's debt payments-to-income ratio?
A) 0%
B) 8%
C) 75%
D) 29%
E) 20%
Explanation: ($250 + $40 + $58) / $1,200 = 29%.
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
133) Karen Price has determined that her net worth is $24,000, excluding her home. She owes $90,000 on her mortgage and $12,000 on a car loan. What is Karen's debt-to-equity ratio?
A) 3.2
B) 2.0
C) 0.5
D) 2.7
E) 0.3
Explanation: $12,000 / $24,000 = 0.5
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
134) Karen Price is 55 years old, divorced, and has worked at her current job for five years. She is interested in looking at her credit report. Which of the following pieces of information should she find in this report?
A) The address of the house she lived in as a child
B) A loan for furniture she paid off 12 years ago
C) The outstanding balance on the Visa card she has today
D) The names and addresses of her grown children
E) The fact that she was late paying her electric bill 8 years ago
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Analyze
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
135) Maryann Lawrence wants to get a loan in just her name. She knows the creditor cannot:
A) refuse her credit if she is creditworthy.
B) consider income from her part-time job.
C) consider the payment history of all her joint accounts.
D) consider alimony payments she receives from her ex-husband.
E) consider child support payments she receives from her ex-husband.
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
136) Jennifer Rogers needs a loan to purchase a new car. She knows the creditor must:
A) ask about her children.
B) consider whether she has a telephone.
C) evaluate her on the same basis as applicants who are male.
D) require her to find a cosigner for the loan.
E) ask about her exercise practices.
Difficulty: 1 Easy
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
137) The information in your credit report is used by the credit bureau to calculate your:
A) debt to equity ratio.
B) FICO credit score.
C) debt payment to income ratio.
D) liquidity ratio.
E) long term capitalization ratio.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
138) Which of the following is a credit bureau?
A) Federal Reserve
B) Federal Trade Commission
C) Better Business Bureau
D) Experian
E) FICO
Difficulty: 2 Medium
Topic: Credit bureaus
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
139) Paul Carter is applying for a loan from a bank. The bank is concerned because Paul is an airline pilot for United Airlines. The bank thinks that Paul may be laid off in the near future. Which one of the 5 Cs of credit is the bank concerned with?
A) Character
B) Capacity
C) Capital
D) Collateral
E) Conditions
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
140) Jane Calvert is applying for a loan from a bank. The bank knows she owns a house worth $160,000 and a car with a trade-in value of $12,000 as well as other personal assets worth approximately $44,000. Which one of the 5 Cs of credit is the bank looking at?
A) Character
B) Capacity
C) Capital
D) Collateral
E) Conditions
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
141) Charles Rickman is applying for a loan from the bank. The bank has determined that he has never been late making payments on past loans. Which of the 5 Cs of credit is the bank looking at?
A) Character
B) Capacity
C) Capital
D) Collateral
E) Conditions
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
142) Amy Farmer is getting a loan to buy a used car. The bank wants to know the trade-in value of the car she is purchasing. Which of the 5 Cs of credit is the bank examining?
A) Character
B) Capacity
C) Capital
D) Collateral
E) Conditions
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
143) Michael Flowers believes that his credit card company has made an error in its monthly statement to him. Which consumer protection law specifies procedures he can use to dispute this monthly statement?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
144) Paul Phillips has checked his credit report and believes there is an error in it. Which consumer protection law specifies that he has the right to have errors in his credit report investigated?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
145) Samantha Prescott knows that credit companies must evaluate her on the same basis as a borrower who is male. Which consumer protection law guarantees her this right?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
146) Mike Cook has been receiving calls at work every two hours from a collection company that is trying to collect a past due loan from him. He believes this is harassment and that the collections company is not allowed to do this. Which consumer protection law provides protection from this type of harassment?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
147) Lester McCann is thinking about getting a loan for a new car. He knows that when he goes shopping for a loan that all of the banks must report the annual percentage rate as well as all other terms and conditions of the loan. This will allow him to easily compare loans from different banks. Which consumer protection law requires full disclosure on all loans?
A) Fair Credit Reporting Act
B) Fair Credit Billing Act
C) Equal Credit Opportunity Act
D) Fair Debt Collection Practices Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
148) Which one of the following would not be considered closed-end credit?
A) Home mortgage loan
B) Installment loan to purchase new furniture
C) Line of credit from your bank
D) Automobile loan
E) Single lump-sum credit loan due in 90 days
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
149) Co-branded credit cards:
A) are often linked with a certain business trade name offering "points."
B) help build customer loyalty.
C) allow the cardholder to earn rebates on products and services.
D) have increased in popularity since 1992.
E) All of these are correct.
Difficulty: 2 Medium
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
150) Which one of the following would not be a good use of a home equity loan?
A) Paying for a college education
B) Buying a new boat
C) Putting a new roof on your house
D) Paying medical bills
E) Adding a deck on the back of your house
Difficulty: 1 Easy
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
151) If you want to improve your credit score, then you should:
A) get copies of your credit report.
B) pay your bills on time.
C) make sure you understand how your credit score is determined.
D) beware of credit-repair scams.
E) do all of these things.
Difficulty: 1 Easy
Topic: Credit reports and ratings
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
152) Brian Porter's net worth is $120,000, excluding his home. His liabilities of $54,000 include all of his credit card balances and the balance due on his auto loan and home improvement loan. His townhouse has a market value of $220,000 and he owes $190,000 to his mortgage company. What is Brian's debt-to-equity ratio?
A) 0.65
B) 0.74
C) 0.45
D) 0.35
E) 0.28
Explanation: $54,000 / $120,000 = 0.45
Difficulty: 2 Medium
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
153) Stored-value cards:
A) look nothing like typical debit cards.
B) have decreased in popularity over the past decade.
C) work the same as a credit card.
D) can lose their value if a retailer goes bankrupt.
E) are currently being used for very limited purposes.
Difficulty: 2 Medium
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
154) Which FICO credit score would represent the least risky borrower?
A) 400
B) 550
C) 625
D) 700
E) 825
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
155) According to a recent survey, how many U.S. households carry one or more credit cards?
A) 4 out of 10
B) 5 out of 10
C) 6 out of 10
D) 7 out of 10
E) 9 out of 10
Difficulty: 2 Medium
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
156) If you think you have been discriminated against by consumer reporting agencies or creditors, you should file a complaint with which government agency?
A) Federal Reserve Board
B) Federal Deposit Insurance Corporation
C) Consumer Financial Protection Bureau
D) Office of the Comptroller of the Currency
E) National Credit Union Administration
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
157) Approximately how many credit card users would be classified as "convenience users" who generally pay off their balances in full each month?
A) 20%
B) 33%
C) 45%
D) 50%
E) 70%
Difficulty: 2 Medium
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
158) Debit cards are often called:
A) bank cards.
B) ATM cards.
C) cash cards.
D) check cards.
E) All of these
Difficulty: 1 Easy
Topic: Debit, credit, and other cards
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
159) In addition to department stores, where else is a good place to obtain your first credit card?
A) Banks
B) Credit unions
C) Savings and loans associations
D) Gasoline companies
E) Investment companies
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
160) Which one of the following is not included in the 5 C's of credit?
A) Conditions
B) Cash flow
C) Collateral
D) Capacity
E) Character
Difficulty: 1 Easy
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
161) Credit bureaus obtain data from which of the following?
A) Banks
B) Finance companies
C) Merchants
D) Credit card companies
E) All of these
Difficulty: 1 Easy
Topic: Credit bureaus
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
162) Which of the following federal consumer credit laws requires creditors to promptly credit customers' accounts and to return overpayments if requested?
A) Fair Credit Reporting Act
B) Truth in Lending Act
C) Equal Credit Opportunity Act
D) Fair Credit Billing Act
E) Consumer Credit Reporting Reform Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
163) The Consumer Financial Protection Bureau receives an average of how many complaints about the credit bureaus every year?
A) 5,000
B) 25,000
C) 36,000
D) 42,000
E) 50,000
Difficulty: 3 Hard
Topic: Consumer credit - complaints
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
164) Which of the following contains new protections for college students and young adults?
A) Fair Credit Reporting Act
B) Credit Card Accountability, Responsibility, and Disclosure Act
C) Truth in Lending Act
D) Equal Credit Opportunity Act
E) Fair Credit Billing Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
165) Your credit card company must send you a notice ________ days before they can increase your interest rate.
A) 30
B) 45
C) 50
D) 60
E) 90
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
166) Which federal consumer credit law places the maximum cost of a credit report at $8?
A) Consumer Credit Reporting Reform Act
B) Fair and Accurate Credit Transactions Act
C) Fair Debt Collection Practices Act
D) Fair Credit Billing Act
E) Truth in Lending Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
167) Which federal consumer credit law requires "credit repair" companies to give consumers a written contract that can be canceled within three business days?
A) Fair and Accurate Credit Transactions Act
B) Fair Debt Collection Practices Act
C) Fair Credit Billing Act
D) Truth in Lending Act
E) Consumer Credit Reporting Reform Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
168) Which federal consumer credit law requires issuers to display on monthly statements how long it would take to pay off the existing balance and the total interest cost if the consumer paid only the minimum due?
A) Fair Credit Reporting Act
B) Equal Credit Opportunity Act
C) Truth in Lending Act
D) Credit Card Accountability, Responsibility, and Disclosure Act
E) Fair Credit Billing Act
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
169) How many alternatives do most consumers have in financing current purchases?
A) 1
B) 2
C) 3
D) 4
E) unlimited
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
170) Which of the following is true of the baby boom generation?
A) Represents about 30% of the population
B) Holds nearly 60% of the outstanding debt
C) Extensively uses debt
D) Born between 1946 and 1964
E) All of these
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
171) Which of the following is not a valid reason for using credit?
A) To pay for a medical emergency
B) To purchase a car for a homemaker returning to the workforce
C) To purchase an item now for less money than it will cost later
D) To pay for everyday living expenses
E) To pay for a college education
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
172) Which of the following are most vulnerable to misusing credit?
A) Married couples
B) Shopaholics and young adults
C) Retired adults
D) Savers
E) Unemployed individuals
Difficulty: 1 Easy
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
173) Which of the following is not true of mobile commerce?
A) Some smart phones are equipped to make purchases.
B) Consumers have shown increased interest in this concept.
C) A credit card company may provide a sticker that attaches to the phone rather than a physical credit card.
D) Apps can be used to quickly pay with a mobile phone.
E) Little interest in this concept has been shown by retailers and finance companies.
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
174) The market value of Karen's home is $120,000 and the balance on her mortgage loan is $80,000. The lender has agreed to let her borrow up to 75% of the total value of her home less the mortgage. How much can she borrow with a home equity loan?
A) $10,000
B) $40,000
C) $80,000
D) $90,000
E) $120,000
Explanation: $120,000 × 75% = $90,000; $90,000 - $80,000 = $10,000.
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
175) If you believe you have been refused credit due to discrimination, what are three steps you can take?
1. Complain to the creditor. Let the creditor know you are aware of the law.
2. File a complaint with the government. You can report any violations to the appropriate government enforcement agency. When you are denied credit, the creditor must give you the name and address of the appropriate agency to contact.
3. If all else fails, sue the creditor. You have the right to bring a case in a federal district court. If you win, you can recover your actual damages and punitive damages of up to $10,000 plus reasonable attorney fees and court costs.
Difficulty: 3 Hard
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-06 Describe the laws that protect you if you have a complaint about consumer credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
176) Elizabeth has a monthly net income of $1,400. She has a house payment of $600 per month, a car loan with payments of $300 per month, a Visa card with payments of $60 per month, and a credit card with a local department store with payments of $32 per month. What is Elizabeth's debt payment-to-income ratio? Is she within range of what experts suggest you spend on consumer credit payments?
Elizabeth's monthly expenses:
| |
House payment | 600 |
Car loan | 300 |
Visa card | 60 |
Store card | 32 |
Total Expenses | $992 |
Debt payments-to-income = ($992 − $600) / $1,400 = 0.28 = 28%
Experts recommend that you spend no more than 20% of your net income on consumer credit payments. Elizabeth is not within this range and actually exceeds this recommendation by 18% (38% − 20%).
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
177) What is consumer credit? What are its advantages and disadvantages?
Consumer credit is the use of credit by individuals and families for personal needs (except a home mortgage). Among the advantages of using credit are:
1. Consumer credit enables people to enjoy goods and services now and pay for them through payment plans based on future income.
2. Credit cards permit the purchase of goods even when funds are low.
3. It is safer to use credit instead of carrying large amounts of cash.
4. The use of credit cards can provide up to a 50-day "float."
5. Some credit cards extend the manufacturer's warranty by up to one year when you buy products with their cards.
6. Some credit cards provide emergency medical evacuation for travelers.
Among the disadvantages of using credit are:
1. The greatest disadvantage is the temptation to overspend, especially during periods of inflation.
2. Failure to repay a loan may result in loss of income, valuable property, and your good reputation.
3. It can even lead to court action and bankruptcy as well as damage family relationships.
4. Credit costs money. Paying for purchases over a period of time is more costly than paying for them with cash.
5. It ties up the use of future income.
Difficulty: 2 Medium
Topic: Consumer credit - advantages and disadvantages
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
178) What are the two basic types of credit? Give examples of both.
Difficulty: 2 Medium
Topic: Open-end credit; Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
179) What are the three most common types of closed-end credit?
Difficulty: 2 Medium
Topic: Closed-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
180) What is revolving check credit?
Difficulty: 1 Easy
Topic: Open-end credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
181) How can you protect yourself against credit card fraud?
∙ Treat your cards like money. Store them in a secure.
∙ Shred anything with your account number before throwing it away.
∙ Don't give your card number over the phone or online unless you initiate the call.
∙ Don't write your card number on a postcard or the outside of an envelope.
∙ Remember to get your card and receipt after a transaction, and double-check to be sure it's yours.
∙ If your billing statement is incorrect or your credit cards are lost or stolen, notify your card issuers immediately.
∙ If you don't receive your billing statement, notify the company immediately.
Difficulty: 2 Medium
Topic: Fraud prevention
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
182) What are the two general rules of measuring credit capacity?
Difficulty: 3 Hard
Topic: Credit capacity and ratio analysis
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
183) What are a few things to consider before you cosign a loan?
a. Be sure you can afford to pay the loan.
b. Your liability for this loan may keep you from getting other credit you want.
c. If the borrower defaults, you could lose property, such as automobiles or furniture, which you pledged to secure the loan.
d. Request that a copy of overdue-payment notices be sent to you so that you can take action to protect your credit history.
e. Check your state law. Some states have laws giving you additional rights as a cosigner.
Difficulty: 2 Medium
Topic: Cosigning
Learning Objective: 06-03 Assess your credit capacity and build your credit rating.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
184) What do creditors look for when you apply for credit?
Difficulty: 2 Medium
Topic: Five C's of credit
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
185) Describe the federal law that protects you from billing mistakes/errors.
Difficulty: 2 Medium
Topic: Consumer credit - laws, rights, and protections
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
186) If your identity is stolen, the Federal Trade Commission recommends that you take what three actions immediately?
a. Contact the fraud departments of each of the three major credit bureaus.
b. Contact the creditors for any accounts that have been tampered with or opened fraudulently.
c. File a police report.
Difficulty: 2 Medium
Topic: Stolen identity
Learning Objective: 06-05 Identify the steps you can take to avoid and correct credit mistakes.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
187) A friend comes to you for advice about improving their credit score. What are the five steps for improving your credit score?
1) Get copies of your credit report - then make sure the information is correct.
2) Pay your bills on time.
3) Understand how your credit score is determined.
4) Learn the legal steps to take to improve your credit report.
5) Beware of credit-repair scams.
Difficulty: 2 Medium
Topic: Credit reports and ratings
Learning Objective: 06-04 Describe the information creditors look for when you apply for credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
188) What does it mean when a credit card is co-branded?
Difficulty: 2 Medium
Topic: Sources of consumer credit
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
189) Describe the scam referred to as "Phishing."
With this type of scam, you receive fraudulent e-mail messages that appear to be from your financial institution. The messages often appear authentic and may include the institution's logo and marketing slogans.
These messages usually describe a situation that requires immediate attention and state that your accounts will be terminated unless you verify your personal information by clicking on a provided web link. The web link then takes you to a screen that asks for confidential information, including:
∙ Account numbers.
∙ Social Security numbers.
∙ Passwords.
∙ Place of birth.
∙ Other information used to identify you.
Those perpetrating the fraud then use this information to access your accounts or assume your identity.
Difficulty: 2 Medium
Topic: Fraud prevention
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
190) What are the three alternatives in financing current purchases for most consumers? Describe the trade-offs of each alternative.
Most consumers have three alternatives in financing current purchases: They can draw on their savings, use their present earnings, or borrow against their expected future income. Each of these alternatives has trade-offs. If you continually deplete your savings, little will be left for emergencies or retirement income. If you spend your current income on luxuries instead of necessities, your well-being will eventually suffer. And if you pledge your future income to make current credit purchases, you will have little or no spendable income in the future.
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-01 Define consumer credit and analyze its advantages and disadvantages.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
191) When activating a new credit card, consumers are warned to watch for "the pitch." Describe "the pitch."
Difficulty: 2 Medium
Topic: Consumer credit - general
Learning Objective: 06-02 Differentiate among various types of credit.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
Document Information
Connected Book
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Chapter 4 Planning Your Tax Strategy
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Chapter 6 Introduction to Consumer Credit
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Chapter 7 Credit Options and Costs
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Chapter 8 Consumer Purchasing Strategies and Legal Protection
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