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

The ________ is the true simple interest rate paid over the life of a loan and provides a reasonable approximation for the true cost of borrowing.

When do the payments on a Stafford Loan begin?

You just received a loan from your banker to buy seed and plant your alfalfa field.The loan is a discount loan and is for $5,000 for 1 year and the quoted rate was 10%.What is your APR?

What are the opportunity costs associated with Student loans?

Sharry is interested in buying her first home.Currently her monthly gross income is $3,000.From this she makes a car payment of $240,a personal loan payment of $300 and a student loan payment of $85.Based on this information would a bank approve Sharry for a mortgage?

Amortization refers to the process in which a large proportion of the early payments of an installment loan goes to cover interest,and the later payments have a larger proportion going towards the payment of principal.

The interest that you pay on your student loans will lower your taxable income if you meet IRS guidelines.

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 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?

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

Which is better,a fixed-rate loan or a variable-rate loan?

The ________ is the automatic repayment plan with a 10-year term.

You are headed to the mountains for some climbing this summer and you need some gear.The local mountaineering shop is offering 6% financing on all purchases before the end of the month.Your savings account is currently paying 5%,and you are in a marginal tax bracket of 28%.Which of the following is true?

Today,about 75 percent of high school graduates choose to attend four-year colleges,community colleges,technical schools,or the workforce.

Consumer loans can range from unsecured,fixed-rate,single-payment loans to secured,variable-rate,installment loans.

A Chapter 13 personal bankruptcy is characterized by all of the following except

Direct subsidized loans are made only to undergraduates who demonstrate financial need.

A balloon loan calls for repayment of both interest and principal at regular intervals,with the payment levels set so that the loan expires at a preset date.

Explain why add-on installment loans are more expensive than simple interest loans.

Explain the purpose of a convertible loan.