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Multiple Choice Quiz
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1
Which of the following would be a relatively inexpensive loan?
A)John Smith gets a loan that uses his $10,000 CD as collateral.
B)William Jones gets a personal loan from the Tinker Federal Credit Union.
C)Jane Carter buys furniture and finances it with a loan from Mathis Brothers, the store where she bought the furniture.
D)Melanie Barest buys a new refrigerator and charges it on her credit card and expects to have it paid off within one year.
E)All of the above are inexpensive loans.
2
Your credit card charges you a 2% fee for cash advances and has an APR of 18%. It also starts charging you interest on cash advances as soon as you get the advance. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge you will pay on this cash advance for the month?
A)$12
B)$9
C)$21
D)$0
E)None of the above
3
You borrow $1000 and repay the loan over 2 years with monthly payments on a compound loan. Over the two years you incur $163.68 in interest. Using the approximation formula in your textbook, what is the APR on this loan?
A)16.37%
B)15.71%
C)30.22%
D)32.66%
E)None of the above
4
You borrow $1000 and have been told that you will repay it in 4 payments and that your interest rate is 12% on a simple interest loan and that your payments will be determined using the declining balance method. How much would you actually receive when getting this loan and what would be the four payments you must make on this loan?
A)You will receive $1000 at the beginning and make payments of $280, $272.50, $265 and $257.50 each quarter.
B)You will receive $1000 at the beginning and make payments of $280 each quarter.
C)You will receive $1000 at the beginning and make payments of $269.03 each quarter.
D)You will receive $880 at the beginning and make payments of $250 each quarter.
E)None of the above
5
Which of the following would be a potential warning sign of debt problems?
A)Increasing the balance on your credit card each month.
B)Using savings to pay routine bills such as groceries or utilities.
C)Borrowing more to pay old debts.
D)Going over your credit limits on credit cards.
E)All of the above can be warning signs of debt problems.
6
Sue Ann James is depressed and goes to the mall and buys herself three new outfits at Dillards to make herself feel better. Which of the reasons for the over-indebtedness of families is this purchase most likely a result of?
A)The use of money to punish a spouse
B)The overindulgence of children
C)Emotional problems
D)Keeping up with the Joneses
E)All of the above are reasons Sue Ann goes to the mall.
7
__________ is the interest computed on principal only and without compounding.
A)Simple interest
B)Compound interest
C)Add-on interest
D)Discount interest
8
The __________ is where the assessment of the finance charge is after payments made during the billing period have been subtracted.
A)Previous balance method
B)Average daily balance method
C)Adjusted balance method
D)Zero balance method
9
The __________ is a local nonprofit organization affiliated with the National Foundation for Consumer Credit that provides debt counseling services for families and individuals.
A)Credit bureau
B)Chamber of Commerce
C)Consumer Credit Counseling Service
D)Internal Revenue Service
E)None of the above
10
Which of the following is true about a loan from a commercial bank?
A)They often require collateral or security when making a loan.
B)They often lend to consumers without establishing a credit history and charge a high rate of interest.
C)They make loans to members only.
D)They make loans on the cash value of life insurance policies.
E)None of the above is true about a loan from a credit union.





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