Question 1

Households tend to be interest-inelastic borrowers.

Accepted Answer

A) True 
 B)False

Question 2

Emily Barnes has gone to the First State Bank and gotten a loan of $5,000 so she can go on vacation.She plans on paying the loan back in one payment in three months.Which of the following categories will this loan fall into?

Accepted Answer

A) Residential mortgage loan 
B) Installment loan 
C) Noninstallment loan 
D) Revolving line of credit 
E) None of the options is correct

Question 3

A(n)______________________ loan is a short-term or a medium-term loan repayable in two or more consecutive payments,usually monthly or quarterly.

Accepted Answer

The answer of A(n)______________________ loan is a short-term or a...

Question 4

A(n)____________________________________________ mortgage is an agreement drawn up by a bank that gives the bank control of the property if the loan cannot be repaid as planned.

Accepted Answer

The answer of A(n)____________________________________________ mortgage is an agreement drawn up...

Question 5

In a revolving line of credit,where a customer is subject to high fees and interest costs and is required to make only a small portion of total debt owed,usually called "minimum payment",often results in:

Accepted Answer

A) amortization of debt. 
B) negative amortization of debt. 
C) depreciation of debt. 
D) cumulative depreciation of debt. 
E) prepayment of debt.

Question 6

A rule of thumb used to determine how much interest income a bank is allowed to accrue at any point in time from a consumer loan that is being paid off in monthly installments is known as the ____________.

Accepted Answer

The answer of A rule of thumb used to determine...

Question 7

According to the text,which of the following has been the fastest growing consumer loan category in the last few decades inside the United States?

Accepted Answer

A) Credit card loans 
B) Auto loans 
C) Home mortgages 
D) Personal loans 
E) Education loans

Question 8

The Equal Credit Opportunity Act authorizes individuals and families to review their credit file for accuracy and to demand an investigation and correction of any apparent inaccuracies.

Accepted Answer

A) True 
 B)False

Question 9

The symbol "SN" assigned as a rating indicates that a bank has been judged to be an outstanding performer under the terms of the Community Reinvestment Act.

Accepted Answer

A) True 
 B)False

Question 10

Loans to individuals and families to finance the purchase of new homes are known as:

Accepted Answer

A) noninstallment loans. 
B) installment loans. 
C) residential mortgage loans. 
D) nonresidential cash loans. 
E) None of the options is correct.

Question 11

FNMA does not purchase home mortgages in the secondary market if the borrower's monthly total debt repayments (including housing costs)exceed _________ percent of the borrower's monthly gross income.

Accepted Answer

A) 28 
B) 30 
C) 36 
D) 40 
E) None of the options is correct

Question 12

The most important factor used in the FICO credit score appears to be the borrower's payment history.

Accepted Answer

A) True 
 B)False

Question 13

The interest rate on most consumer loans is based on the cost of loanable funds to the bank,plus nonfunding cost,plus premiums for default and time to maturity,and also includes the desired profit margin on the loan.This method of pricing loans is known as _____________________.

Accepted Answer

The answer of The interest rate on most consumer loans...

Question 14

Which of the following consumer loans has grown in popularity as a result of the passage of the Tax Reform Act of 1986?

Accepted Answer

A) Credit card loans 
B) Home equity loans 
C) Long-term,noninstallment loans 
D) Short-term,installment loans 
E) All of the options are correct

Question 15

Short-term loans drawn upon by individuals and families for immediate cash needs and repayable in a lump sum are known as:

Accepted Answer

A) noninstallment loans. 
B) installment loans. 
C) residential mortgage loans. 
D) nonresidential cash loans. 
E) None of the options is correct

Question 16

The most profitable credit card customers for a bank are those that:

Accepted Answer

A) use their credit card frequently. 
B) pay off any charges incurred within a few days. 
C) charge at least $10,000 per year. 
D) use their credit card as a source of installment loans. 
E) None of the options is correct

Question 17

Points on a home mortgage loan results in a lender earning a higher effective interest rate on the loan than just the loan rate quoted to the borrower.

Accepted Answer

A) True 
 B)False

Question 18

How did the Tax Reform Act of 1986 increase the appeal of home equity loans?

Accepted Answer

A) It allowed customers to borrow up to 100 percent of the value of their home. 
B) It eliminated bank income taxes from this type of loan. 
C) It protected homes under Chapter 13 bankruptcy. 
D) It allowed the difference between the market value and amount of loans against a mortgage to be used as a borrowing base. 
E) It required banks to lend on homes in the geographic area of their deposits.

Question 19

A majority of installment and lump-sum payment loans to families and individuals are made on floating interest rates.

Accepted Answer

A) True 
 B)False

Question 20

Prepaid cards which carry balances that can be spent electronically in stores until the balance entered in such cards is fully used up are known as:

Accepted Answer

A) smart cards. 
B) deposit cards. 
C) match cards. 
D) credit cards. 
E) All of the options are correct.

Exam 18: Consumer Loans, Credit Cards, and Real Estate Lending

Households tend to be interest-inelastic borrowers.

Emily Barnes has gone to the First State Bank and gotten a loan of $5,000 so she can go on vacation.She plans on paying the loan back in one payment in three months.Which of the following categories will this loan fall into?

A(n)______________________ loan is a short-term or a medium-term loan repayable in two or more consecutive payments,usually monthly or quarterly.

A(n)____________________________________________ mortgage is an agreement drawn up by a bank that gives the bank control of the property if the loan cannot be repaid as planned.

In a revolving line of credit,where a customer is subject to high fees and interest costs and is required to make only a small portion of total debt owed,usually called "minimum payment",often results in:

A rule of thumb used to determine how much interest income a bank is allowed to accrue at any point in time from a consumer loan that is being paid off in monthly installments is known as the ____________.

According to the text,which of the following has been the fastest growing consumer loan category in the last few decades inside the United States?

The Equal Credit Opportunity Act authorizes individuals and families to review their credit file for accuracy and to demand an investigation and correction of any apparent inaccuracies.

The symbol "SN" assigned as a rating indicates that a bank has been judged to be an outstanding performer under the terms of the Community Reinvestment Act.

Loans to individuals and families to finance the purchase of new homes are known as:

FNMA does not purchase home mortgages in the secondary market if the borrower's monthly total debt repayments (including housing costs) exceed _________ percent of the borrower's monthly gross income.

The most important factor used in the FICO credit score appears to be the borrower's payment history.

The interest rate on most consumer loans is based on the cost of loanable funds to the bank,plus nonfunding cost,plus premiums for default and time to maturity,and also includes the desired profit margin on the loan.This method of pricing loans is known as _____________________.

Which of the following consumer loans has grown in popularity as a result of the passage of the Tax Reform Act of 1986?

Short-term loans drawn upon by individuals and families for immediate cash needs and repayable in a lump sum are known as:

The most profitable credit card customers for a bank are those that:

Points on a home mortgage loan results in a lender earning a higher effective interest rate on the loan than just the loan rate quoted to the borrower.

How did the Tax Reform Act of 1986 increase the appeal of home equity loans?

A majority of installment and lump-sum payment loans to families and individuals are made on floating interest rates.

Prepaid cards which carry balances that can be spent electronically in stores until the balance entered in such cards is fully used up are known as: