Question 1

What are the risks to the borrower with adjustable-rate loans?

Accepted Answer

A)  During times of inflation your salary may increase during the term of the loan. 
B)  That the market rates of interest may increase during the term of the loan. 
C)  It is harder to budget for loan payments that may increase during the term of the loan. 
D)  Both B and C are correct. 
A)  During times of inflation your salary may increase during the term of the loan. 
B)  That the market rates of interest may increase during the term of the loan. 
C)  It is harder to budget for loan payments that may increase during the term of the loan. 
D)  Both B and C are correct.

Question 2

The simple interest method is the most common method of calculating payments on an installment loan.

Accepted Answer

A) True 
 B)False

Question 3

Calculate the interest on $6,000 borrowed at an annual rate of 9% under the simple interest loan method for 9 months.

Accepted Answer

A)  $270 
B)  $360 
C)  $405 
D)  $450 
E)  $540 
A)  $270 
B)  $360 
C)  $405 
D)  $450 
E)  $540

Question 4

You are considering building a new deck on your home, what factors should you consider when deciding whether to borrow the money or take the money out of your savings account?

Accepted Answer

A)  You should compare the after-tax return on your savings with the after-tax APR on your loan. 
B)  It's simple, if you can afford to pay cash then you should not take out the loan. 
C)  What impact the savings withdrawal will have on your liquidity. 
D)  Both A and C are correct. 
A)  You should compare the after-tax return on your savings with the after-tax APR on your loan. 
B)  It's simple, if you can afford to pay cash then you should not take out the loan. 
C)  What impact the savings withdrawal will have on your liquidity. 
D)  Both A and C are correct.

Question 5

What are the advantages of a home equity loan, and what, if any, are the disadvantages?

Accepted Answer

It is usually easier and less expensive

Question 6

A loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a(n)

Accepted Answer

A)  fully amortized loan. 
B)  balloon loan. 
C)  installment loan. 
D)  secured loan. 
E)  none of the above 
A)  fully amortized loan. 
B)  balloon loan. 
C)  installment loan. 
D)  secured loan. 
E)  none of the above

Question 7

Name the four common loans available for college students.

Accepted Answer

The four common loans include

Question 8

Defaulting on a secured loan may lead to the collateral being repossessed.

Accepted Answer

A) True 
 B)False

Question 9

You are considering a home equity loan. Your marginal tax bracket is 25%. You want to borrow $30,000 and are quoted an APR of 10%. How much money would you save in taxes each year if you use the tax-deductible home equity loan?

Accepted Answer

A)  $1,300 
B)  $920 
C)  $750 
D)  none of the above 
A)  $1,300 
B)  $920 
C)  $750 
D)  none of the above

Question 10

Under a Federal Direct Loan, you don't begin making payments until six months after graduation.

Accepted Answer

A) True 
 B)False

Question 11

Home equity/second mortgage loans have two important advantages over most other types of loans. They are

Accepted Answer

A)  tax deductibility of payments and longer terms. 
B)  tax deductibility of interest and lower interest rates. 
C)  no risk for borrower and less amortization. 
D)  increase in future financing flexibility and no recourse clause. 
E)  none of the above 
A)  tax deductibility of payments and longer terms. 
B)  tax deductibility of interest and lower interest rates. 
C)  no risk for borrower and less amortization. 
D)  increase in future financing flexibility and no recourse clause. 
E)  none of the above

Question 12

A simple interest installment loan calculates interest on the unpaid balance. An add-on

Accepted Answer

A)  calculates the same way with the addition of a factor. 
B)  calculates interest on the original balance. 
C)  is less costly. 
D)  is more costly. 
E)  both B and D 
A)  calculates the same way with the addition of a factor. 
B)  calculates interest on the original balance. 
C)  is less costly. 
D)  is more costly. 
E)  both B and D

Question 13

Gary is taking out a $5,000 loan for 1 year at an APR of 12%. His bank has offered him a loan using the add-on method. Using first the financial calculator method and the add-on method calculate Gary's monthly loan payment.

Accepted Answer

A)  $444.24; $466.67 
B)  $475.00; $448.94 
A)  $444.24; $466.67 
B)  $475.00; $448.94

Question 14

You have just obtained a personal loan for a new home movie system under the simple interest method. You have borrowed $12,000 for 9 months at an annual rate of 10%. Your marginal tax rate is 28%. What are the total interest charges you would pay if the loan is paid off on time?

Accepted Answer

A)  $1,200 
B)  $1,080 
C)  $900 
D)  $648 
E)  none of the above 
A)  $1,200 
B)  $1,080 
C)  $900 
D)  $648 
E)  none of the above

Question 15

A Federal Direct Student Loan has tremendous advantages over other types of loans, including

Accepted Answer

A)  The interest is deferred while you are in school. 
B)  They have low monthly payments and a 20% balloon payment after 5 years. 
C)  They use the add-on method to determine your monthly payment. 
D)  None of the above. 
A)  The interest is deferred while you are in school. 
B)  They have low monthly payments and a 20% balloon payment after 5 years. 
C)  They use the add-on method to determine your monthly payment. 
D)  None of the above.

Question 16

The "Repo Man" recently repossessed your car for failure to make payments. You still owed $5,000 on the loan, but since it was always broken, you were glad to get rid of it anyway. The bank sold the car at a wholesale auction for $3,000. The bank also paid the "Repo Man" $200 and paid attorney fees of $300. Based on the deficiency payments clause in your loan, what are you liable for?

Accepted Answer

A)  $0; repossession means the bank must "eliminate" the debt 
B)  $500 
C)  $2,000 
D)  $2,500 
E)  none of the above 
A)  $0; repossession means the bank must "eliminate" the debt 
B)  $500 
C)  $2,000 
D)  $2,500 
E)  none of the above

Question 17

With a(n) ________ installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan.

Accepted Answer

A)  simple interest method 
B)  partial amortization method 
C)  discount method 
D)  add-on method 
E)  none of the above 
A)  simple interest method 
B)  partial amortization method 
C)  discount method 
D)  add-on method 
E)  none of the above

Question 18

With a discount method single-payment loan, the entire interest charge is subtracted from the principal before you receive the money, and at maturity you repay the principal.

Accepted Answer

A) True 
 B)False

Question 19

Bridge loans provide short-term funding until longer-term or additional financing is found.

Accepted Answer

A) True 
 B)False

Question 20

Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment by the due date. Technically, you

Accepted Answer

A)  are bankrupt. 
B)  are in default. 
C)  are usually not given a chance to make good on the overdue payment. 
D)  none of the above 
A)  are bankrupt. 
B)  are in default. 
C)  are usually not given a chance to make good on the overdue payment. 
D)  none of the above

What are the risks to the borrower with adjustable-rate loans?

The simple interest method is the most common method of calculating payments on an installment loan.

Calculate the interest on $6,000 borrowed at an annual rate of 9% under the simple interest loan method for 9 months.

You are considering building a new deck on your home, what factors should you consider when deciding whether to borrow the money or take the money out of your savings account?

What are the advantages of a home equity loan, and what, if any, are the disadvantages?

A loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a(n)

Name the four common loans available for college students.

Defaulting on a secured loan may lead to the collateral being repossessed.

You are considering a home equity loan. Your marginal tax bracket is 25%. You want to borrow $30,000 and are quoted an APR of 10%. How much money would you save in taxes each year if you use the tax-deductible home equity loan?

Under a Federal Direct Loan, you don't begin making payments until six months after graduation.

Home equity/second mortgage loans have two important advantages over most other types of loans. They are

A simple interest installment loan calculates interest on the unpaid balance. An add-on

Gary is taking out a $5,000 loan for 1 year at an APR of 12%. His bank has offered him a loan using the add-on method. Using first the financial calculator method and the add-on method calculate Gary's monthly loan payment.

You have just obtained a personal loan for a new home movie system under the simple interest method. You have borrowed $12,000 for 9 months at an annual rate of 10%. Your marginal tax rate is 28%. What are the total interest charges you would pay if the loan is paid off on time?

A Federal Direct Student Loan has tremendous advantages over other types of loans, including

With a(n) ________ installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan.

With a discount method single-payment loan, the entire interest charge is subtracted from the principal before you receive the money, and at maturity you repay the principal.

Bridge loans provide short-term funding until longer-term or additional financing is found.

Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment by the due date. Technically, you

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

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Exam 7: Using Consumer Loans: The Role of Planned Borrowing

What are the risks to the borrower with adjustable-rate loans?

The simple interest method is the most common method of calculating payments on an installment loan.

Calculate the interest on $6,000 borrowed at an annual rate of 9% under the simple interest loan method for 9 months.

You are considering building a new deck on your home, what factors should you consider when deciding whether to borrow the money or take the money out of your savings account?

What are the advantages of a home equity loan, and what, if any, are the disadvantages?

A loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a(n)

Name the four common loans available for college students.

Defaulting on a secured loan may lead to the collateral being repossessed.

You are considering a home equity loan. Your marginal tax bracket is 25%. You want to borrow $30,000 and are quoted an APR of 10%. How much money would you save in taxes each year if you use the tax-deductible home equity loan?

Under a Federal Direct Loan, you don't begin making payments until six months after graduation.

Home equity/second mortgage loans have two important advantages over most other types of loans. They are

A simple interest installment loan calculates interest on the unpaid balance. An add-on

Gary is taking out a $5,000 loan for 1 year at an APR of 12%. His bank has offered him a loan using the add-on method. Using first the financial calculator method and the add-on method calculate Gary's monthly loan payment.

You have just obtained a personal loan for a new home movie system under the simple interest method. You have borrowed $12,000 for 9 months at an annual rate of 10%. Your marginal tax rate is 28%. What are the total interest charges you would pay if the loan is paid off on time?

A Federal Direct Student Loan has tremendous advantages over other types of loans, including

With a(n) ________ installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan.

With a discount method single-payment loan, the entire interest charge is subtracted from the principal before you receive the money, and at maturity you repay the principal.

Bridge loans provide short-term funding until longer-term or additional financing is found.

Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment by the due date. Technically, you

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters