Question 1

When comparing two installment loans with the same principal and annual percentage rate (APR), the loan with:

Accepted Answer

A) the longer maturity will have the lower monthly payment and the higher total costs. 
B) the shorter maturity will have the lower monthly payment and the higher total costs. 
C) the longer maturity will have the higher monthly payment and the higher total costs. 
D) the shorter maturity will have the lower monthly payment and the lower total costs. 
E) the longer maturity will have the higher monthly payment and the lower total costs. 
A) the longer maturity will have the lower monthly payment and the higher total costs. 
B) the shorter maturity will have the lower monthly payment and the higher total costs. 
C) the longer maturity will have the higher monthly payment and the higher total costs. 
D) the shorter maturity will have the lower monthly payment and the lower total costs. 
E) the longer maturity will have the higher monthly payment and the lower total costs.

Question 2

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

Accepted Answer

A) True 
 B)False

Question 3

A single-payment loan is advantageous to a borrower only if:

Accepted Answer

A) the interest rate is more than that on an installment loan offered by commercial banks. 
B) funds are expected to be available in the future to repay the loan in a lump sum. 
C) the finance charges are calculated using the discount method. 
D) the finance charges are calculated using the simple interest method. 
E) it has a collateral note. 
A) the interest rate is more than that on an installment loan offered by commercial banks. 
B) funds are expected to be available in the future to repay the loan in a lump sum. 
C) the finance charges are calculated using the discount method. 
D) the finance charges are calculated using the simple interest method. 
E) it has a collateral note.

Question 4

Which of the following statements regarding loan maturity is true?

Accepted Answer

A) The longer the loan maturity, the higher the amount of interest paid. 
B) The shorter the loan maturity, the higher the total cost of borrowing. 
C) The longer the loan maturity, the higher the monthly payments. 
D) The shorter the loan maturity, the lower the monthly payments. 
E) The longer the loan maturity, the lower the total cost of borrowing. 
A) The longer the loan maturity, the higher the amount of interest paid. 
B) The shorter the loan maturity, the higher the total cost of borrowing. 
C) The longer the loan maturity, the higher the monthly payments. 
D) The shorter the loan maturity, the lower the monthly payments. 
E) The longer the loan maturity, the lower the total cost of borrowing.

Question 5

If you borrow money on a single-payment loan and discover that you cannot pay it back when it is due, you should:

Accepted Answer

A) purchase a credit card. 
B) unsecure the loan. 
C) pay a prepayment penalty. 
D) negotiate a rollover. 
E) file for bankruptcy. 
A) purchase a credit card. 
B) unsecure the loan. 
C) pay a prepayment penalty. 
D) negotiate a rollover. 
E) file for bankruptcy.

Question 6

The repayment of the principal of installment loans is made in a lump sum, and the repayment period of installment loans is 6 to 12 months.

Accepted Answer

A) True 
 B)False

Question 7

Calculating interest using the _____ will result in the highest APR on a single-payment loan.

Accepted Answer

A) double declining balance method 
B) discount method 
C) average loan balance method 
D) simple interest method 
E) add-on method 
A) double declining balance method 
B) discount method 
C) average loan balance method 
D) simple interest method 
E) add-on method

Question 8

Consumer loans, like open account credits, result from a rather informal process.

Accepted Answer

A) True 
 B)False

Question 9

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Accepted Answer

A) a liability 
B) collateral 
C) debt 
D) insurance 
E) corporate deposit 
A) a liability 
B) collateral 
C) debt 
D) insurance 
E) corporate deposit

Question 10

Home equity loans are similar to home equity credit lines because they are also not secured with any collateral.

Accepted Answer

A) True 
 B)False

Question 11

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

Accepted Answer

A) APR 
B) balance due 
C) prepayment penalty 
D) basic cost of money 
E) amount saved 
A) APR 
B) balance due 
C) prepayment penalty 
D) basic cost of money 
E) amount saved

Question 12

Using the _____ would be least expensive for the borrower when determining the total amount to be paid to the lender.

Accepted Answer

A) simple interest method 
B) add-on interest method 
C) discount method 
D) sum-of-the-digits method 
E) average loan balance method 
A) simple interest method 
B) add-on interest method 
C) discount method 
D) sum-of-the-digits method 
E) average loan balance method

Question 13

The monthly payment (rounded to the nearest dollar)on an 8%, 36-month, add-on loan of $10,000 would be:

Accepted Answer

A) $278. 
B) $300. 
C) $314. 
D) $344. 
E) $380. 
A) $278. 
B) $300. 
C) $314. 
D) $344. 
E) $380.

Question 14

It is better to use your savings instead of borrowing to make a purchase when:

Accepted Answer

A) the borrower has adequate savings. 
B) interest rates are rising. 
C) interest rates are falling. 
D) the cost of borrowing is much greater than the interest earned on savings. 
E) the interest earned on savings is greater than the interest paid on the loan. 
A) the borrower has adequate savings. 
B) interest rates are rising. 
C) interest rates are falling. 
D) the cost of borrowing is much greater than the interest earned on savings. 
E) the interest earned on savings is greater than the interest paid on the loan.

Question 15

When the simple interest method is used to determine finance charges, the interest is calculated based on the:

Accepted Answer

A) future value of the installments. 
B) average outstanding balance. 
C) actual balance of the loan. 
D) present value of all finance charges. 
E) future value of all finance charges. 
A) future value of the installments. 
B) average outstanding balance. 
C) actual balance of the loan. 
D) present value of all finance charges. 
E) future value of all finance charges.

Question 16

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

Accepted Answer

A) nominal-rate 
B) standard-rate 
C) variable-rate 
D) fixed-rate 
E) low-rate 
A) nominal-rate 
B) standard-rate 
C) variable-rate 
D) fixed-rate 
E) low-rate

Question 17

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

Accepted Answer

A) Commercial banks 
B) Credit unions 
C) Consumer finance companies 
D) Savings and loan associations 
E) Asset management companies 
A) Commercial banks 
B) Credit unions 
C) Consumer finance companies 
D) Savings and loan associations 
E) Asset management companies

Question 18

If you don't have much down payment money, a _____ can effectively act as the cheapest source of down payment.

Accepted Answer

A) rebate 
B) personal loan 
C) credit card 
D) commercial loan 
E) 0% APR 
A) rebate 
B) personal loan 
C) credit card 
D) commercial loan 
E) 0% APR

Question 19

The annual percentage rate (APR)is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

Accepted Answer

A) dollar cost of credit method 
B) discount method 
C) average loan balance method 
D) double declining balance method 
E) simple interest method 
A) dollar cost of credit method 
B) discount method 
C) average loan balance method 
D) double declining balance method 
E) simple interest method

Question 20

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

Accepted Answer

A) add-on method. 
B) double-declining-balance method. 
C) discount method. 
D) simple interest method. 
E) past-due balance method. 
A) add-on method. 
B) double-declining-balance method. 
C) discount method. 
D) simple interest method. 
E) past-due balance method.

When comparing two installment loans with the same principal and annual percentage rate (APR), the loan with:

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

A single-payment loan is advantageous to a borrower only if:

Which of the following statements regarding loan maturity is true?

If you borrow money on a single-payment loan and discover that you cannot pay it back when it is due, you should:

The repayment of the principal of installment loans is made in a lump sum, and the repayment period of installment loans is 6 to 12 months.

Calculating interest using the _____ will result in the highest APR on a single-payment loan.

Consumer loans, like open account credits, result from a rather informal process.

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Home equity loans are similar to home equity credit lines because they are also not secured with any collateral.

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

Using the _____ would be least expensive for the borrower when determining the total amount to be paid to the lender.

The monthly payment (rounded to the nearest dollar)on an 8%, 36-month, add-on loan of $10,000 would be:

It is better to use your savings instead of borrowing to make a purchase when:

When the simple interest method is used to determine finance charges, the interest is calculated based on the:

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

If you don't have much down payment money, a _____ can effectively act as the cheapest source of down payment.

The annual percentage rate (APR)is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

Understanding the Financial Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds, Etfs, and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 7: Using Consumer Loans

When comparing two installment loans with the same principal and annual percentage rate (APR), the loan with:

From a financial planning perspective, you need not worry about the size of monthly payments when taking a loan.

A single-payment loan is advantageous to a borrower only if:

Which of the following statements regarding loan maturity is true?

If you borrow money on a single-payment loan and discover that you cannot pay it back when it is due, you should:

The repayment of the principal of installment loans is made in a lump sum, and the repayment period of installment loans is 6 to 12 months.

Calculating interest using the _____ will result in the highest APR on a single-payment loan.

Consumer loans, like open account credits, result from a rather informal process.

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.

Home equity loans are similar to home equity credit lines because they are also not secured with any collateral.

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

Using the _____ would be least expensive for the borrower when determining the total amount to be paid to the lender.

The monthly payment (rounded to the nearest dollar)on an 8%, 36-month, add-on loan of $10,000 would be:

It is better to use your savings instead of borrowing to make a purchase when:

When the simple interest method is used to determine finance charges, the interest is calculated based on the:

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

If you don't have much down payment money, a _____ can effectively act as the cheapest source of down payment.

The annual percentage rate (APR)is equivalent to the stated rate of interest when the _____ is used to calculate finance charges.

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on the installment loan will be the:

Understanding the Financial Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Stocks and Bonds

Investing in Mutual Funds, Etfs, and Real Estate

Planning for Retirement

Preserving Your Estate

Filters