Question 1

When a creditor looks at the borrower's attitude toward credit obligations,which of the 5 Cs of credit is she analyzing?

Accepted Answer

A)   Capacity
B)   Capital
C)   Character
D)   Collateral
E)   ConditionsF) C) and D)
G) A) and E)

Question 2

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

Accepted Answer

A) True 
 B)False

Question 3

Although credit permits more immediate satisfaction of needs and desires,it

Accepted Answer

A)   does increase total purchasing power.
B)   is always best to avoid credit purchases.
C)   does not diminish your ability to buy more goods and services on credit.
D)   has no opportunity costs attached to it.
E)   does not increase total purchasing powerF) A) and B)
G) A) and C)

Question 4

If you cosign a loan,

Accepted Answer

A)   you are not being asked to guarantee the debt.
B)   it is not your legal responsibility to pay the debt.
C)   you'll have to pay up to the full amount of the debt if the borrower does not pay.
D)   the creditor must first try to collect from the borrower.
E)   the creditor cannot garnish your wages.F) A) and B)
G) C) and D)

Question 5

Generally,most of the information in your credit file may be reported for only ______ years.

Accepted Answer

A)   7
B)   9
C)   11
D)   13
E)   15F) A) and B)
G) C) and D)

Question 6

Debt payments-to-income ratio is

Accepted Answer

A)   calculated by dividing total liabilities by net worth.
B)   calculated by dividing monthly debt payments (not including house payments) by net monthly income.
C)   determined by dividing your assets into liabilities.
D)   a useless ratio for determining your credit capacity.
E)   rarely used by creditors in determining credit worthiness.F) None of the above
G) A) and E)

Question 7

Financing from car dealers in affiliation with financial institutions is called factory financing.

Accepted Answer

A) True 
 B)False

Question 8

Department stores and gasoline companies are good places to obtain your first credit card.

Accepted Answer

A) True 
 B)False

Question 9

When you cosign a loan,you are being asked to guarantee this debt.

Accepted Answer

A) True 
 B)False

Question 10

A home equity loan is a good source of credit for daily expenses.

Accepted Answer

A) True 
 B)False

Question 11

With an open-end credit,you pay back one-time loans in a specified period of time in equal amounts.

Accepted Answer

A) True 
 B)False

Question 12

If your debt-to-equity ratio is about 1,you have probably reached the upper limit of debt obligations.

Accepted Answer

A) True 
 B)False

Question 13

Most consumers have only one choice in financing current purchases.

Accepted Answer

A) True 
 B)False

Question 14

In evaluating your credit application,a lender may

Accepted Answer

A)   ask your age.
B)   want to know if you are on public assistance.
C)   require your marriage certificate.
D)   ask if you are married or divorced.
E)   ask your race and nationality.F) B) and C)
G) C) and D)

Question 15

Cobranding has become increasingly unpopular since General Motors launched its credit card in 1992.

Accepted Answer

A) True 
 B)False

Question 16

A valuable asset pledged to assure loan payments and subject to seizure upon default is called

Accepted Answer

A)   capacity.
B)   character.
C)   capital.
D)   collateral.
E)   conditions.F) D) and E)
G) A) and B)

Question 17

If you think that your bill is wrong,you should first

Accepted Answer

A)   contact the local credit bureau and inform it of the billing error.
B)   complain to the Better Business Bureau.
C)   contact your provincial consumer protection agency.
D)   notify the creditor of the error.
E)   contact your attorney to settle the matter.F) All of the above
G) B) and C)

Question 18

A line of credit is considered a form of revolving credit.

Accepted Answer

A) True 
 B)False

Question 19

In the near future,smart cards will provide a crucial link between the World Wide Web and the physical world.

Accepted Answer

A) True 
 B)False

Question 20

Credit is an arrangement to receive cash,goods,or services now and pay for them in the future.

Accepted Answer

A) True 
 B)False

Exam 5: Consumer Credit: Advantages, Disadvantages, Sources, and Costs

A valuable asset pledged to assure loan payments and subject to seizure upon default is called

Correct AnswerverifiedShow Answer

If your debt-to-equity ratio is about 1,you have probably reached the upper limit of debt obligations.

Correct AnswerverifiedShow Answer

When you cosign a loan,you are being asked to guarantee this debt.

Correct AnswerverifiedShow Answer

Although credit permits more immediate satisfaction of needs and desires,it

Correct AnswerverifiedShow Answer

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

Correct AnswerverifiedShow Answer

Most consumers have only one choice in financing current purchases.

Correct AnswerverifiedShow Answer

A line of credit is considered a form of revolving credit.

Correct AnswerverifiedShow Answer

In evaluating your credit application,a lender may

Correct AnswerverifiedShow Answer

Generally,most of the information in your credit file may be reported for only ______ years.

Correct AnswerverifiedShow Answer

Cobranding has become increasingly unpopular since General Motors launched its credit card in 1992.

Correct AnswerverifiedShow Answer

In the near future,smart cards will provide a crucial link between the World Wide Web and the physical world.

Correct AnswerverifiedShow Answer

If you cosign a loan,

Correct AnswerverifiedShow Answer

If you think that your bill is wrong,you should first

Correct AnswerverifiedShow Answer

When a creditor looks at the borrower's attitude toward credit obligations,which of the 5 Cs of credit is she analyzing?

Correct AnswerverifiedShow Answer

Credit is an arrangement to receive cash,goods,or services now and pay for them in the future.

Correct AnswerverifiedShow Answer

Department stores and gasoline companies are good places to obtain your first credit card.

Correct AnswerverifiedShow Answer

With an open-end credit,you pay back one-time loans in a specified period of time in equal amounts.

Correct AnswerverifiedShow Answer

A home equity loan is a good source of credit for daily expenses.

Correct AnswerverifiedShow Answer

Debt payments-to-income ratio is

Correct AnswerverifiedShow Answer

Financing from car dealers in affiliation with financial institutions is called factory financing.

Correct AnswerverifiedShow Answer

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