Question 1

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

Accepted Answer

A)   the annual percentage rate (APR)  quoted by a financial institution.
B)   the annual percentage rate (APR)  compounded semi-annually.
C)   the effective annual rate (EAR)  annually.
D)   the effective annual rate (EAR)  semi-annually
E)   the effective annual rate (EAR)  quarterly.F) C) and D)
G) A) and E)

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   compounded.
B)   simple interest.
C)   discount.
D)   add-on.
E)   installment.F) C) and D)
G) A) and B)

Question 5

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

Accepted Answer

A)   $16.
B)   $200.
C)   $216.
D)   $208
E)   $8.F) None of the above
G) B) and C) C

Question 6

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%?

Accepted Answer

A)   $416
B)   $432
C)   $483
D)   $556
E)   $565F) None of the above
G) D) and E)

Question 7

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

Accepted Answer

A) True 
 B)False  True

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   credit life insurance
B)   credit accident and health insurance
C)   credit property insurance
D)   credit casualty insurance
E)   credit debit insuranceF) D) and E)
G) A) and E)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Banks often encourage you to make the maximum payment.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   bankruptcy
B)   proposal
C)   consolidation
D)   counseling
E)   AssuranceF) A) and D)
G) B) and C)

Question 15

Which of the following are signs of debt problems?

Accepted Answer

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 B)
G) A) and C)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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%?

Accepted Answer

A)   $200
B)   $333
C)   $445
D)   $556
E)   $565F) B) and E)
G) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   6.00%
B)   6.09%
C)   6.17%
D)   6.18%
E)   6.50%F) B) and C)
G) A) and B)

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

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%?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Banks often encourage you to make the maximum payment.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following are signs of debt problems?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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%?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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False

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C

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True

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