AnswersPersonal Finance - EL3403Credit and Loans

Credit and Loans Answers

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1
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In determining whether to issue a loan, banks are not allowed to ask about an applicant’s

A
employment history.
B
date of birth.
C
country of origin.
D
income tax returns.
2
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The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
a personal loan.
C
an auto loan.
D
a mortgage.
3

Which describes the difference between simple and compound interest?

A
Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans.
B
Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.
C
Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans.
D
Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.
4

principal borrowedoutstanding balanceprojected balance

A
principal borrowed
B
outstanding balance
C
projected balance
5

What is a benefit of obtaining a personal loan?

A
getting money with special repayment terms
B
getting money with favorable interest rates
C
getting small amounts of money to use immediately
D
getting large amounts of money to use immediately
6

An example of secured credit is a

A
payday loan.
B
credit card.
C
mortgage.
D
medical bill.
7

For which buyer would a lender most likely approve a $200,000 mortgage?

A
a person with a credit score of 800 with a large amount of debt who has recently switched to a lower-paying job
B
a person with a credit score of 760 with a small amount of debt who has had steady employment for many years
C
a person with a credit score of 650 with a large amount of available credit who has a low-paying, but steady job
D
a person with a credit score of 600 with a small amount of available credit who has recently switched to a high-paying job
8

Which describes the difference between secured and unsecured credit?

A
Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.
B
Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.
C
Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.
D
Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.
9

Which best describes a way people can use personal loans?

A
to buy a house
B
to buy a car
C
to pay for college
D
to pay for groceries
10

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

A
$10.00
B
$21.00
C
$33.10
D
$46.41

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