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Exam 6: Choosing a Source Credit: the Costs of Credit Alternatives

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Question 1

Multiple Choice

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What is monthly payment for a $25,000 amortized loan to purchase a car payable over 5 years at an annual interest rate of 12%?

A) $200
B) $333
C) $445
D) $556
E) $565

F) B) and C)
G) A) and B)

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Question 2

Multiple Choice

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Which of the following are signs of debt problems?

A) you continually go over your spending limit
B) use credit cards as a necessity rather than as a convenience
C) always borrowing money to make it from one payday to the next
D) A and B are correct.
E) A, B and C are correct.

F) A) and D)
G) B) and E)

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Question 3

Multiple Choice

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What effective rate of interest is being charged when the quoted APR is 6%, compounded semi-annually?

During the last decade, the personal bankruptcy rate has increased almost 8 percent annually.

The least expensive loans are available from car dealers, appliance stores, department stores.

In a straight bankruptcy many, but not all, debts are forgiven.

Which type of credit insurance repays your debt in the event of a loss of income due to illness or injury?

Compounding the annual percentage rate (APR) four times a year is equivalent to:

If you are having trouble paying your bills, turn to a company that claims to offer assistance in solving debt problems.

With a larger down payment, you'll probably pay a higher interest rate on your loan.

If a bank charges you interest up front then this loan is called a _________ loan

It takes considerably longer to repay an interest only line of credit than it takes to repay a traditional consumer installment loan.

There is never a charge for any service provided by a credit counsellor.

If you borrow $200 at 8 percent annual interest and repay it in one lump sum at the end of one year, you will have to pay

You can often obtain medium-priced loans from banks, trust companies, and credit unions.

Both consumer proposals and declarations of insolvency through an assignment in bankruptcy are considered an easy way out of debt.

Banks often encourage you to make the maximum payment.

A maximum 5-year plan for paying creditors all or a portion of outstanding debt is referred to as a consumer ________________________.

What is monthly payment for a $25,000 amortized loan to purchase a car payable over 5 years at an annual interest rate of 6%?

Two key concepts that you should keep in mind when borrowing are the finance charge and the annual percentage rate.