AnswersWA-Financial EducationUnderstanding Credit

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61
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Open-end credit is

a
a loan given for a short period of time that is not dependent on credit history.
p
pledged to a company as security for a loan repayment.
a
an amount of time during which a loan can be repaid without interest.
a
an agreement with an institution on a certain amount that can be repeatedly borrowed.
62
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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
63

Which describes an example of using unsecured credit?

A
Someone buys new gutters for a home with a credit card.
B
Someone buys a new vehicle with a loan from a car dealer.
C
Someone buys a new home with a mortgage from a bank.
D
Someone buys a new boat with a loan from a boat dealer.
64

A lender is assessing customers for loans. The credit scores of four customers are below.IdaCorrineBruceRoland820550390610Which person will the lender assess as having the lowest risk?

A
Ida
B
Corrine
C
Bruce
D
Roland
65

Terrell has $300 to open a checking account. He plans to use the ATM four times per month at his local branch. He does not overdraft his account. Bank Account Terms and ConditionsWhich checking account would be best for Terrell?

Question illustration
A
Account A
B
Account B
C
Account C
D
Account D
66

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.
67

This year, Mr. Thomas has a higher credit score than he did last year. Which of the following should Mr. Thomas expect with the improved score? Check all that apply.

A
a more difficult time borrowing money to buy a house
B
an easier time getting a car loan
C
an easier time renting an apartment
D
a denial when opening a bank account
E
higher interest rates on credit cards
68

What is the best reason for homebuyers to create a budget before taking out a mortgage?

A
to compare the value of their home with that of their neighbors
B
to plan how to pay off the money they have borrowed
C
to set aside enough money to refinance the loan
D
to figure out how long they can stay in their home
69

Fido wants to buy a new car. He will need to get a car loan. Fido decides to wait for a few months until his credit history improves. Which explains whether Fido is making a sensible decision?

A
Fido’s decision is sensible because the selling price of the car should be less in a few months.
B
Fido’s decision is sensible because the cost of the car loan should be less if his credit history improves.
C
Fido’s decision is not sensible because he needs the car right away.
D
Fido’s decision is not sensible because it does not matter if he buys the car now or in a few months.
70

A credit score is based in part on

A
employment and race.
B
income and location.
C
employment and trust.
D
payment history and total debt.
71

The chart shows the costs associated with the purchase of a new home.

Question illustration
A
cost of making repairs to the new home.
B
fees that must be paid to local schools.
C
costs associated with obtaining the loan.
D
fees assessed by the state or local government.
72

Which statement is true of both mortgages and auto loans?

A
They are riskier than student loans for lenders.
B
They do not require a minimum payment.
C
They are secured loans and generally require a down payment.
D
They have higher interest rates than credit cards.
73

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

A
when they are able.
B
within a year.
C
over time, usually many years.
D
as soon as they can.
74

James has $1500 to open a checking account. He can maintain a monthly balance of at least $1000. He plans to use the ATM four times per month at his local branch. He does not overdraft his account and plans to use direct deposit. He also plans to pay his bills online and he averages 8 bills per month. Bank Account Terms and ConditionsJames wants an account with the lowest fees. Which checking account would be best for James?

Question illustration
A
Account A
B
Account B
C
Account C
D
Account D
75

An example of secured credit is a

A
payday loan.
B
credit card.
C
mortgage.
D
medical bill.
76

Read the scenario.Casey has been saving for a new car and is ready to make a purchase. Having a substantial amount to put down as a down payment, Casey approaches the car dealership. The salesperson and the loan officer view Casey's willingness to make a high down payment positively.Why would Casey be considered a lower risk by the lender for planning to make a high down payment?

A
It shows that Casey prefers a high-interest rate.
B
It shows that Casey is committed to paying off the loan.
C
It shows that Casey may not need a loan at all.
D
It shows that Casey might refinance the loan soon.
77

credit cardmortgagetaxbond

A
credit card
B
mortgage
C
tax
D
bond

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Entrepreneurship Answers — WA-Financial Education