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ch.4 pf test
| Question | Answer |
|---|---|
| 1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. What statement is true? | All three cards are completely different |
| 2. When loans are amortized, monthly payments are _____, while the amount of your monthly payment applied to interest __________ and the amount of your monthly payment applied to the principal ________ over time? | Constant, decreases, increases |
| 3. Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lo | Put in 5000 for the down payment and choose a loan with a long-term length. |
| 4. Credit card disclosure: “your fie date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month.” Identify the true sta | 25 days after the end of the billing cycle is referred to as the grace period. |
| 5. Amy and chuck each buy a house in the same neighborhood for $250,000. Amys monthly mortgage payment is $400 more per month than Chucks. Which one of the following statements could explain this difference? | Amy chose a shorter term for her mortgage, so her monthly payments are higher. |
| 6. Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment? | You pay a large sum of money when taking out a mortgage, so the principal of your loan is smaller. |
| 7. Why would credit card companies prefer that their cardholder make the minimum monthly payment every month rather than paying their total balance in full? | Enables the credit card company to make more money. |
| 8. Which of the following statements comparing credit and debit cards is TRUE? | With debit cards you’re spending your own money at the point of sale, but with credit cards you are getting a loan that you need to pay back later. |
| 9. If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice? | Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control. |
| 10. Denise took out a payday loan for $300 in august. By February of the nest year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened? | Payday loans must be paid in full within two weeks, if not the only option is to renew the loan for a high penalty fee which she did approximately 12 times. |
| 11. A loan with a shorter-term length will have _______ monthly payments, and you will pay ______ in total interest? | Higher, less |
| 12. As a young adult, all of the following are good strategies for building credit, EXCEPT? | Take out a payday loan |
| 13. Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card? | $200 |
| 14. The average APR for a payday loan is closest to? | 400% |
| 15. Which of these statements best explains why it’s not often a good idea to pay more than the monthly amount due on an amortized loan? | The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly. |
| 16. Which of these credit payback strategies would lead to the HIGHEST overall cost? | Making the minimum payments every month with an occasional late payment |
| 17. Select the statement below that accurately describes a characteristic of a credit card | Making full payments on time every month is the only way to avoid interest charges |
| 18. Why are payday loans so much easier to qualify for than traditional bank loans? | Payday loans require proof of employment or other regular income but not a credit check. |
| 19. Which of the following is most likely to represent a fixed rate, secured debt? | auto loan |
| 20. Reading through a credit cards Schumer Box, you see the APR for a specific card is set at 9.99%-23.99%. Which statement is true? | Your APR will be within that range depending on the strength of your credit history. |
| 21. What is the advantage of using a credit card? | You could have an emergency purchase that you don’t have the money to pay for right now. |
| 22. Which of the following statements is CORRECT about secured loans? | I the borrower does not make payments the lender can repossess the item. |
| 23. Which of the following is true about fixed and adjustable-rate mortgages? | Have a fixed interest rate for a few years. After which time the interest rate fluctuates according to general market conditions. |
| 24. An excellent credit score will help with which aspect of car financing? | Qualifying for a low interest rate. |
Created by:
Breslyn Jeschke