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1. | One advantage to repaying an installment debt over a longer period of time is that __________
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| a) the monthly payment will be smaller.
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| b) the total interest on the loan will be smaller.
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| c) the total interest on the loan will be greater.
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| d) the monthly payment will be greater.
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2. | Reasons that people use credit include all of the following EXCEPT __________
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| a) to get things immediately.
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| b) to avoid paying interest.
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| c) to spread the payments over a long period.
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| d) to avoid having to save in order to purchase something.
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3. | When deciding whether to buy on credit, a consumer should ask all the following questions EXCEPT __________
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| a) Can I postpone purchasing this item until later?
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| b) When will I need to replace the new item?
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| c) If I pay cash, what will be my opportunity cost?
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| d) If I use credit, will the satisfaction I get from the item I buy be greater than the interest paid?
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4. | Which of the following statements about the different types of financial institutions is TRUE?
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| a) Consumers with a poor credit history can usually borrow money from consumer finance companies at low rates of interest.
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| b) Commercial banks offer a narrow range of services, but control the largest amount of money.
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| c) Savings and loan associations are similar to savings banks in that most of their business comes from savings accounts and home loans.
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| d) In general, credit unions offer lower interest rates on savings and charge higher interest rates on loans than other financial institutions.
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5. | Regular charge accounts and revolving charge accounts offered by stores are similar in that __________
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| a) neither account has a credit limit.
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| b) interest is charged each month on any unpaid portion of the bill.
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| c) both require the bill to be paid in full each month in order to make additional purchases.
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| d) interest is charged each month even if the bill is paid in full.
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6. | All of the following statements about credit cards are true EXCEPT __________
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| a) credit cards allow people to make purchases without paying cash at the time of purchase.
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| b) credit cards can be used at many different stores, restaurants, hotels, and businesses.
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| c) credit cards give consumers access to loans at all times without having to apply for them.
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| d) consumers must pay the bill in full each month.
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7. | Which of the following statements about finance charges and annual percentage rates is TRUE?
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| a) The finance charge is the cost of credit expressed in dollars and cents, and the annual percentage rate is the cost of credit expressed as a yearly percentage.
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| b) The annual percentage rate is expressed in dollars and cents, and the finance charge is the cost of credit expressed as a yearly percentage.
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| c) The annual percentage rate is usually the same as the interest rate.
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| d) The finance charge is fixed, or the same, among all creditors.
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8. | An individual's credit rating is based on his or her __________
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| a) capacity to pay, age, and collateral.
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| b) character, education, and collateral.
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| c) history of credit use, capacity to pay, character, and collateral.
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| d) capacity to pay, marital status, and character.
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9. | The major responsibilities of credit card users are to __________
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| a) pay their bills on time and keep track of their charges.
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| b) pay their bills on time, keep track of their charges, and maintain control over debt.
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| c) pay their bills on time and notify the credit card issuer if the card is lost or stolen.
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| d) keep track of their charges and notify the credit card issuer immediately if the card is lost or stolen.
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10. | The Equal Credit Opportunity Act has affected consumer credit in all the following ways EXCEPT __________
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| a) it prohibits discrimination in giving credit on the basis of sex, race, color, religion, national origin, marital status, age, or receipt of public assistance.
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| b) loan applicants must receive notice of a decision within 30 days, and if credit is denied the lender must give the reasons.
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| c) it makes it illegal for a creditor to require an applicant's spouse to sign unless the application for credit was made jointly by husband and wife.
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| d) it protects consumers from a creditor making changes in the APR, in the way charges and fees are calculated, and in the payment schedule without informing them.
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11. | The purpose of state usury laws is to __________
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| a) restrict the amount of interest that can be charged for credit.
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| b) prohibit discrimination in giving credit.
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| c) protect the privacy and accuracy of information in a credit check.
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| d) prevent abuse by professional debt collectors.
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12. | Which of the following statements about declaring personal bankruptcy is NOT TRUE?
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| a) It is very difficult to reestablish credit as long as bankruptcy proceedings remain on a credit record.
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| b) When debtors declare personal bankruptcy, they give most of what they own to be distributed to their creditors.
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| c) Individuals who declare personal bankruptcy can easily reestablish credit and start over.
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| d) Declaring personal bankruptcy discharges debtors of all of their debts, except for taxes.
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