True/False
Indicate whether the sentence or statement is true
or false. |
| | 1. | A history of
late payments does not affect a person's credit rating. |
| | 2. | A person
with collateral is a good credit risk. |
| | 3. | A co-signer
is a person who agrees to repay a loan if the borrower does not. |
| | 4. | An unsecured
loan does not have to be repaid in a certain amount of time. |
| | 5. | If consumers
do not pay their debts, lending institutions lower their interest rates to make loans more
available. |
| | 6. | Government
regulation of credit ensures that people can borrow as much money as they want. |
| | 7. | An interest
ceiling is the maximum rate of interest that can be charged. |
| | 8. | A bank
cannot refuse to lend money on the basis of a person's race. |
| | 9. | A person who
declares bankruptcy does not have to pay taxes. |
| | 10. | Credit
records are public information. |
Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question. |
| | 11. | Anytime you
receive credit, you are a. | going into debt. | c. | lowering the cost of an item. | b. | earning interest on
borrowed money. | d. | increasing the value of
an item. | | | | |
|
| | 12. | Which of the
following are durable goods? a. | groceries | c. | cosmetics | b. | refrigerators | d. | concert tickets | | | | |
|
| | 13. | The largest
installment debt in the United States is money people owe a. | on
cars. | c. | on
clothes. | b. | on home mortgages. | d. | on appliances. | | | | |
|
| | 14. | Increasing
the amount of time it takes to repay a loan a. | increases the size of monthly payments. | b. | decreases the amount of
the loan. | c. | decreases the number of payments. | d. | increases the total
interest charges. | | |
|
| | 15. | The benefit
of using credit is a. | paying lower prices for expensive durable
goods. | b. | being able to buy and enjoy a good or service now rather than
later. | c. | not going into debt to buy things you want. | d. | paying interest on
borrowed funds. | | |
|
| | 16. | Which of the
following types of financial institutions controls the most money and offers the widest range of
services? a. | savings and
loan | c. | commercial
bank | b. | finance
company | d. | savings
bank | | | | |
|
| | 17. | Which type
of financial institution is owned and operated by its members? a. | credit
union | c. | savings and
loan | b. | consumer finance
company | d. | commercial
bank | | | | |
|
| | 18. | The maximum
amount of goods and services a person can buy on the promise to pay in the future is
the a. | finance
charge. | c. | credit
limit. | b. | annual percentage rate. | d. | credit card. | | | | |
|
| | 19. | To determine
which creditor is charging the most for credit, a consumer should compare a. | finance
charges. | c. | monthly
payments. | b. | annual percentage rates. | d. | length of the credit agreements. | | | | |
|
| | 20. | A method of
payment that enables customers to transfer funds electronically from their bank to a place where they
purchase goods is a a. | regular charge account. | c. | credit card. | b. | revolving charge
account. | d. | debit
card. | | | | |
|
| | 21. | Your credit
rating affects your ability to a. | obtain a loan. | c. | save money. | b. | get a job. | d. | get an education. | | | | |
|
| | 22. | Which of the
following factors might affect a person's capacity to pay back a loan? a. | other large
debts | b. | involvement in community organizations | c. | educational
background | d. | problems with the law | | |
|
| | 23. | Which of the
following could be used as collateral? a. | credit card | c. | job | b. | current debts | d. | car | | | | |
|
| | 24. | A financial
institution might provide an unsecured loan to a a. | young person who recently started a new job. | b. | person with many
debts. | c. | person who is unemployed. | d. | person who has been
working at a job for several years. | | |
|
| | 25. | A person who
has lost control of debt should a. | make minimum payments on credit cards. | b. | concentrate on paying
the high-interest credit cards first. | c. | borrow additional money to pay off existing
debt. | d. | get someone to co-sign the loans. | | |
|
| | 26. | The credit
industry is regulated by a. | only the federal government. | c. | only state governments. | b. | both federal and state
governments. | d. | financial
institutions. | | | | |
|
| | 27. | Which one of
the following laws made it illegal to deny credit on the basis of race, religion, national origin,
gender, marital status, or age? a. | Truth in Lending Act | c. | Equal Credit Opportunity Act | b. | Fair Credit Reporting
Act | d. | Fair Credit Billing
Act | | | | |
|
| | 28. | One
disadvantage of an interest ceiling is a. | interest rates will not rise above 10
percent. | b. | a surplus of credit may result. | c. | a shortage of credit
may result. | d. | consumers with poor credit become riskier. | | |
|
| | 29. | Debtors who
declare bankruptcy must a. | go to jail. | c. | pay higher interest rates. | b. | give up most of what
they own. | d. | pay lower interest
rates. | | | | |
|
| | 30. | How does
bankruptcy affect creditors? a. | they are not paid off in full | c. | they must charge lower interest | b. | they are immediately
repaid | d. | they must raise
interest rates | | | | |
|
Completion
Complete each sentence or
statement. |
| 31. | A
____________________ is an installment debt owed on real property.
|
| 32. | Automobiles,
appliances, and furniture are examples of ____________________.
|
| 33. | A borrower
can decrease the total ____________________ a lender charges by repaying a loan in a shorter period
of time.
|
| 34. | Consumers
normally purchase durable goods with ____________________.
|
| 35. | The amount
of money a consumer originally borrowed is the ____________________.
|
| 36. | A
____________________ allows a consumer to buy goods and services from the company that extends the
credit.
|
| 37. | The cost of
credit expressed monthly in dollars and cents is the ____________________.
|
| 38. | ____________________ take over contracts for installment debts and add a fee for
collecting the debt.
|
| 39. | ____________________ control the largest amount of money and offer the widest range of
services.
|
| 40. | A
____________________ allows a consumer to buy goods and services at many kinds of
businesses.
|
Matching |
| | Match
each item with the correct statement below. a. | credit | b. | principal | c. | interest | d. | durable goods | e. | mortgage | | |
|
| | 41. | manufactured
items that have a life span longer than three years |
| | 42. | amount of
money a borrower must pay for the use of someone else's money |
| | 43. | installment
debt owed on houses, buildings, or land |
| | 44. | amount of
money originally borrowed in a loan |
| | 45. | receipt of
money to buy goods and services in the present with the promise to pay for them in the
future |
| | Match
each item with the correct statement below. a. | savings and loan | b. | charge
account | c. | credit card | d. | finance charge | e. | annual percentage
rate | | |
|
| | 46. | a credit
device that allows a person to make purchases without paying cash |
| | 47. | cost of
credit expressed monthly in dollars and cents |
| | 48. | depository
institution that accepts deposits and lends money |
| | 49. | cost of
credit expressed as a yearly percentage |
| | 50. | credit from
a particular company allowing consumers to buy goods and pay for them later |
| | Match
each item with the correct statement below. a. | credit check | b. | credit
rating | c. | collateral | d. | secured loan | e. | unsecured
loan | | |
|
| | 51. | something of
value that a borrower lets the lender claim if a loan is not repaid |
| | 52. | estimation
of the risk involved in lending money to a person or business |
| | 53. | investigation of a person's income, current debts, personal life, and past history of
repaying debts |
| | 54. | loan
guaranteed only by a promise to repay it |
| | 55. | loan that is
backed up by collateral |
| | Match
each item to the correct statement below. a. | usury law | b. | bankruptcy | c. | Truth in Lending Act | d. | Equal Credit
Opportunity Act | e. | Fair Credit Reporting Act | | |
|
| | 56. | inability to
pay debts based on income received |
| | 57. | ensures that
consumers are informed about the costs and conditions of borrowing |
| | 58. | protects the
privacy of information in a credit check |
| | 59. | restricts
the amount of interest that can be charged for credit |
| | 60. | prohibits
discrimination in giving credit |