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Credit and Loans — Test Answers

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1
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In the chart, closing costs refers to the

A
cost of making repairs to the new home.
B
fees assessed by the state or local government.
C
costs associated with obtaining the loan.
D
fees that must be paid to local schools.
2
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Based on the information in the graph, what is the most reasonable prediction?

A
Based on recent trends, fewer people will need mortgages in the future.
B
Rising home prices in recent years means that more people will need to take out mortgages.
C
The cost of a new home in the United States will continue to be inexpensive.
D
More people will be able to pay cash for new homes and not need to take out a mortgage.
3

What is the purpose of a credit score?

A
Your credit score is the number of loans and credit cards in your credit history.
B
Your credit score helps to determine if you qualify for Chapter 7 bankruptcy.
C
Your credit score tells lenders how likely you are to make payments on time.
D
Your credit score is the result of conducting the means test evaluation.
4

Haven follows a budget, pays her bills on time, and has a small balance in her savings. She was recently let go from her job. She has some medical procedures scheduled and bills which will be due soon. She finds herself stressing about her financial situation. What are some of her options?

A
She should max out her credit cards while looking for employment.
B
She should seek advice from a credit counselor while looking for employment.
C
She should seek advice from a credit counselor and cancel her medical treatment.
D
She should cancel her medical treatment while looking for employment.
5

Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a residual value of 57% The MSRP for the car Jennifer is leasing is 17 dollars comma 500 What will Jennifer’s monthly lease payment be?

A
93 point 8 4 dollars
B
99 point 7 5 dollars
C
209 point 0 3 dollars
D
312 point 0 6 dollars
6

The Ruiz family filed for Chapter 13 bankruptcy. Mr. Ruiz is employed and makes just enough money to pay the family’s living expenses. Mrs. Ruiz found a part-time job on the weekends. They have three minor children living at home. What impact will this family face after filing for bankruptcy?

A
Bankruptcy will immediately erase the family's pre-existing credit history.
B
The Ruiz family will be legally prevented from seeking new employment.
C
Mrs. Ruiz's part-time job will cause the bankruptcy filing to be voided.
D
Mr. and Mrs. Ruiz might face difficulties in getting new credit or loans.
7

Which statement best describes the role of a credit agency?

A
It tracks the use of credit for lenders.
B
It teaches how to make smart financial decisions.
C
It shows how saving money makes financial sense.
D
It predicts future earning potential for lenders.
8

Feeling overwhelmed with monthly bills, Lin got a second job to help pay her debt but has had difficulty writing a budget and still falls short each month. She currently rents her home, and she has credit card bills, student loans, and a car payment. What step should Lin take next?

A
Lin should contact a credit counselor to create a workable debt management plan.
B
Lin should contact an attorney to discuss the possibility of filing for bankruptcy.
C
Lin should take out a personal loan in order to pay her monthly expenses.
D
Lin should take the means test to see if she qualifies for Chapter 13 bankruptcy.
9

Martin receives an e-mail about a money-making opportunity from a sender who asks for his bank account number. The best way to avoid having his identity stolen is to

A
delete the e-mail and mark it as spam.
B
contact the police and file a phishing report.
C
open the e-mail and follow the steps outlined.
D
contact the government and report the e-mail.
10

Leasing a car for a five-year period usually costs about the same as a five-year loan because __________.

A
the longer time period over which to pay the leasing company creates a higher monthly payment
B
five-year leases are considered more risky and come with a higher interest rate
C
if you lease a car for five years, the leasing company transfers it to a sale with the same monthly payment
D
even with the lower monthly payments, leasing a car for five years requires a second lease agreement, which comes with additional fees
11

The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
an auto loan.
C
a personal loan.
D
a mortgage.
12

When people take out a mortgage, they must pay back the money

A
as soon as they can.
B
when they are able.
C
over time, usually many years.
D
within a year.
13

Which of these are ways that identity theft can happen? Choose four correct answers.

A
by fraud
B
by forgery
C
by social engineering
D
by financial engineering
E
by phishing
14

People most likely need to take out a mortgage when they

A
have legal problems.
B
have bad credit.
C
are making a large purchase.
D
are spending less than $1,000.
15

Why do some lenders require borrowers to secure credit?

A
to prevent defaults
B
to guarantee full repayment
C
to avoid any losses
D
to reduce risk
16

Borrowers taking a balloon payment mortgage most likely

A
are unwilling to accept any risk in borrowing money.
B
plan to rent out their homes.
C
must repay the loan in five to ten years.
D
remain in their homes for 30 years or more.
17

Which of these are ways that identity theft can happen? Choose four correct answers.

A
by forgery
B
by financial engineering
C
by social engineering
D
by phishing
E
by fraud
18

Interest paid on a loan is calculated as a percentage of the

A
compounded principal.
B
amount owed.
C
collateral.
D
principal.
19

Government regulations on credit aim to

A
support those borrowing credit.
B
ensure lenders are repaid.
C
educate lenders about consumers.
D
help borrowers pay on time.
20

Which statement best describes what happens when people declare bankruptcy?

A
All of their debts are eliminated, and they are given a fresh start.
B
All of their debts are eliminated, but they have to sell their assets, such as their homes.
C
Some of their debts can be eliminated, but they must agree not to take on more debt.
D
Some of their debts can be eliminated, and loan terms are renegotiated with lenders.

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