PF 6.02 And 6.03 - Credit Basics And Credit Cards Question Preview (ID: 33984)
6.02 And 6.03 - Credit Basics And Credit Cards.
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Evan is writing a scholarship essay about the importance of responsible money management. He wants to explain the meaning of borrowing. Which statement below would explain the importance of understanding the process of borrowing money?
a) When you are borrowing, you are spending future income.
b) Borrowing is an important part of a responsible financial plan.
c) Borrowing strongly affects the present self but has less impact on the future self.
d) Borrowing builds a strong credit history because it requires individuals to file a credit report.
The financial counselor that Ariel consulted about her use of credit recommended that she keep her use of credit within safe boundaries. Ariel’s financial counselor most likely told her to:
a) Keep the total amount of money she has borrowed, not including her house, under 20% of her net income.
b) Keep the total amount of money she has borrowed, not including her house, under 40% of her net income.
c) Keep the total amount of money she has borrowed, including her mortgage and her car loan, under 20% of her net income.
d) Keep the total amount of money she has borrowed, including her mortgage and her car loan, under 40% of her net income.
David earns $5000 per month at his accounting job. He has a student loan payment of $120, a car loan of $300. Which statement is true?
a) David’s credit payments are within the safe range for someone with his income.
b) David’s student loan payment is within the safe range but his car loan is not.
c) David’s student loan payment must be subtracted from his car loan payment to determine whether his overall credit payments a
d) David’s total credit payments are higher than the recommended amount for someone earning his income.
To answer the essay test question about the meaning of open‐end credit, Ryan should include which statement?
a) Credit is extended in advance so the borrower does not have to apply for credit each time credit is desired.
b) Individual are allowed to borrow an unlimited amount of money as long as they pay it back
c) Payments are equal and required to be paid on a regular basis.
d) A down payment must be made before receiving a loan.
Leah is trying to explain the difference between open‐end and closed‐end credit to her roommate. Which statement should she include in her description of closed‐end credit?
a) Equal payments are required on a regular basis until the loan is repaid.
b) It is a continuous loan the borrower must repay with a revolving balance.
c) Credit limits vary depending on the loan balance.
d) Interest rates vary depending on the repayment history.
Sarah will turn 18 next month. She plans to apply for a credit card. Which statement is true?
a) Sarah can only obtain a credit card if she has a co‐signer or proof of sufficient income to make the required payments.
b) Sarah can obtain a credit card by filling out an application as long as she waits until after her 18th birthday.
c) Sarah will need to use a special application since she is under 25.
d) Sarah cannot obtain a credit card until she turns 21.
Tyler is trying to be responsible in using his new credit card and has heard there is a way to avoid paying interest on the things he charges. How can he LEGALLY avoid paying interest when using his credit card?
a) Tyler needs to pay the credit card balance in full every month before the due date listed on the credit card statement.
b) Tyler needs to limit the use of his credit cards to balance transfers only.
c) Tyler needs to understand that the use of a credit card requires paying interest. There is not legal way for him to avoid pa
d) Tyler needs to make sure he pays the minimum balance every month before the due date on the credit card statement.
Paying the minimum payment on a credit card every month will:
a) make the final amount paid substantially higher than the amount initially charged to the card
b) pay a large percentage of the total balance owed every month
c) help the cardholder create a plan for paying of a credit card in a decent amount of time
d) allow the cardholder to avoid paying any interest charges
Megan’s credit card statement indicates that she is now paying a Penalty APR. Which scenario best describes what may have happened?
a) Megan missed making her January and February credit card payments
b) Megan’s credit card payment has been paid in full each of the last 6 months.
c) Megan’s card had a lower introductory interest rate for the first year and now the interest rate has increased, as stated on
d) The new computer Megan purchased made her account go over the credit limit for 1 week, until the credit card company process
Which is a pawn loan?
a) loan based on the value of personal property. The personal property is held until the borrower repays the loan, including an
b) A short‐term loan that provides immediate cash by securing a borrower’s written check or receiving authorization for automati
c) Short‐term cash advance secured by a taxpayer’s expected tax refund
d) Tangible items such as furniture, electronics or household appliances are leased with the condition that the item will be own
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