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Practice Test Answers

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1
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A down payment is usually what percentage of the asking price of a home?

A
50–75 percent
B
0–5 percent
C
5–20 percent
D
20–50 percent
2
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A credit score tells a lender how

A
trustworthy someone is as a borrower.
B
quickly someone will repay a loan.
C
much money someone will earn in the future.
D
trustworthy someone is as a lender.
3

If a borrower provides collateral and fails to repay the loan,

A
the borrower must buy the collateral back.
B
the borrower may cancel the loan to get the collateral.
C
the lender keeps the collateral in case of late payment.
D
the lender can sell the collateral to cover losses.
4

Which of these is not a fee that affects the total cost of leasing a car?

A
documentation and registration fees
B
total down payment
C
residual value of the car
D
principal charge
5

Which is the most efficient way to prevent bankruptcy?

A
Take steps to stay in good financial health by creating an effective budget.
B
Use a personal loan to pay off some of your high-interest credit cards.
C
Use all your savings to pay off higher interest credit cards.
D
Open low-interest credit cards to pay off high-interest credit cards.
6

Theo and Amelia retained an attorney for advice about their troubled financial situation. Last month, they received a discharge and their Chapter 7. What negative impact will this couple face after filing for bankruptcy?

A
They will need to monitor credit reports.
B
They will need to start an emergency fund.
C
They will need to repair their credit score.
D
They will need to keep a budget.
7

Bankruptcy is considered a last resort because it stays on someone’s record for

A
seven to ten years.
B
eleven to fourteen years.
C
four to seven years.
D
one to four years.
8

Missing one payment may cause borrowers to

A
be charged a late fee.
B
need a down payment.
C
lose their collateral.
D
need a credit report.
9

Which describes the difference between a personal loan and a credit card?

A
Personal loans offer lump sums of money, while credit cards set a maximum amount a person can borrow.
B
Credit cards offer lump sums of money, while personal loans set a maximum amount a person can borrow.
C
Credit cards are secured loans for large amounts, while personal loans are unsecured for small purchases.
D
Personal loans are secured for small purchases, while credit cards are unsecured loans for large amounts.
10

Which of these is not a fee that contributes to the initial cost of leasing a car?

A
acquisition fee
B
first payment
C
final payment
D
disposition fee
11

Companies report people to credit agencies if they

A
borrow too much money.
B
use large amounts of credit at once.
C
fail to use different types of credit.
D
fail to pay their bills on time.
12

A mortgage is a legal agreement between a borrower and a

A
city agency.
B
wealthy relative.
C
family court judge.
D
bank.

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