Question 1

Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?

Accepted Answer

A)  After-tax cost of a home equity loan = before-tax cost (1 + marginal tax rate) 
B)  After-tax cost of a home equity loan = before-tax cost (1 - marginal tax rate) 
A)  After-tax cost of a home equity loan = before-tax cost (1 + marginal tax rate) 
B)  After-tax cost of a home equity loan = before-tax cost (1 - marginal tax rate)

Question 2

Debt consolidation loans are very appealing because

Accepted Answer

A)  they offer liquidation to those who are in good standing with their creditors. 
B)  they offer hope to those who can't keep up with their current payment schedules. 
C)  they offer relinquishment of all debts and financial obligations to those who can't keep up with their current payment schedules. 
D)  all of the above 
A)  they offer liquidation to those who are in good standing with their creditors. 
B)  they offer hope to those who can't keep up with their current payment schedules. 
C)  they offer relinquishment of all debts and financial obligations to those who can't keep up with their current payment schedules. 
D)  all of the above

Question 3

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

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

The APR is larger when money is lent under the discount method than when it is lent under the simple interest method.

Accepted Answer

A) True 
 B)False

Question 6

A rule to determine what proportion of each loan payment is principal and interest is

Accepted Answer

A)  the law of 72. 
B)  the N-ratio method. 
C)  the rule of 78. 
D)  the principal-interest mix. 
E)  the add-on method. 
A)  the law of 72. 
B)  the N-ratio method. 
C)  the rule of 78. 
D)  the principal-interest mix. 
E)  the add-on method.

Question 7

Which of the following statements regarding the risk-return relationship is most accurate?

Accepted Answer

A)  Lower credit scores are associated with lower APRs. 
B)  Higher credit scores are associated with lower APRs. 
C)  Longer loan length is associated with lower APRs. 
D)  Shorter loan length is associated with higher APRs. 
E)  Both B and D are correct. 
A)  Lower credit scores are associated with lower APRs. 
B)  Higher credit scores are associated with lower APRs. 
C)  Longer loan length is associated with lower APRs. 
D)  Shorter loan length is associated with higher APRs. 
E)  Both B and D are correct.

Question 8

Give five things you can do to obtain the most favorable rates on loans,which in essence will allow you to lower the lender's risk.

Accepted Answer

- Develop a strong credit rati

Question 9

Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.

Accepted Answer

A) True 
 B)False

Question 10

How do you know how much debt you can comfortably afford?

Accepted Answer

By applying the debt limit ratio you can

Question 11

Loans using the add-on method are a relative bargain,and should be sought out.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following does not require you to have a good credit rating to issue you a loan?

Accepted Answer

A)  Your family 
B)  Savings and loan 
C)  Commercial bank 
D)  All of the above require a good credit rating to issue a loan. 
A)  Your family 
B)  Savings and loan 
C)  Commercial bank 
D)  All of the above require a good credit rating to issue a loan.

Question 13

Which statement is true regarding direct unsubsidized loans?

Accepted Answer

A)  The federal government pays the loan's interest while the student is still in school. 
B)  Such loans are made to undergraduate, graduate, and professional students. 
C)  Students have to demonstrate financial need in order to receive the loans. 
D)  All of the above are true. 
A)  The federal government pays the loan's interest while the student is still in school. 
B)  Such loans are made to undergraduate, graduate, and professional students. 
C)  Students have to demonstrate financial need in order to receive the loans. 
D)  All of the above are true.

Question 14

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 15

List examples of loans or loan sources that fit into the categories of inexpensive,more expensive,and most expensive.

Accepted Answer

- Inexpensive: family,home equity loans,

Question 16

Samuel is having financial troubles.He owes a significant amount of money to his ex-wife for child support payments,he is also behind on his student loans and has not paid his taxes for the last five years.Sam is considering filing for personal bankruptcy.Why might this not be a wise financial decision for him?

Accepted Answer

This would not be wise decisio

Question 17

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 18

Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.

Accepted Answer

A) True 
 B)False

Question 19

An example of a consumer loan is a(n)

Accepted Answer

A)  unsecured loan. 
B)  pre-payment loan. 
C)  interim loan. 
D)  both A and C. 
A)  unsecured loan. 
B)  pre-payment loan. 
C)  interim loan. 
D)  both A and C.

Question 20

Which of the following is not required by law to be on a loan disclosure statement?

Accepted Answer

A)  Annual percentage rate 
B)  All finance charges 
C)  The total amount financed 
D)  The total amount of payments 
E)  All of the above are required. 
A)  Annual percentage rate 
B)  All finance charges 
C)  The total amount financed 
D)  The total amount of payments 
E)  All of the above are required.

Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?

Debt consolidation loans are very appealing because

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

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?

The APR is larger when money is lent under the discount method than when it is lent under the simple interest method.

A rule to determine what proportion of each loan payment is principal and interest is

Which of the following statements regarding the risk-return relationship is most accurate?

Give five things you can do to obtain the most favorable rates on loans,which in essence will allow you to lower the lender's risk.

Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.

How do you know how much debt you can comfortably afford?

Loans using the add-on method are a relative bargain,and should be sought out.

Which of the following does not require you to have a good credit rating to issue you a loan?

Which statement is true regarding direct unsubsidized loans?

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

List examples of loans or loan sources that fit into the categories of inexpensive,more expensive,and most expensive.

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

Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.

An example of a consumer loan is a(n)

Which of the following is not required by law to be on a loan disclosure statement?

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

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

Exam 7: Student and Consumer Loans: The Role of Planned Borrowing

Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?

Debt consolidation loans are very appealing because

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

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?

The APR is larger when money is lent under the discount method than when it is lent under the simple interest method.

A rule to determine what proportion of each loan payment is principal and interest is

Which of the following statements regarding the risk-return relationship is most accurate?

Give five things you can do to obtain the most favorable rates on loans,which in essence will allow you to lower the lender's risk.

Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.

How do you know how much debt you can comfortably afford?

Loans using the add-on method are a relative bargain,and should be sought out.

Which of the following does not require you to have a good credit rating to issue you a loan?

Which statement is true regarding direct unsubsidized loans?

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

List examples of loans or loan sources that fit into the categories of inexpensive,more expensive,and most expensive.

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

Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.

An example of a consumer loan is a(n)

Which of the following is not required by law to be on a loan disclosure statement?

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

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