Business and Personal Finance © 2007

Chapter 6: Consumer Credit

Practice Tests

1
_____ is an arrangement to receive cash, goods, or services now and pay for them in the future.
A)credit
B)creditor
C)collateral
D)net income
2
The following are all advantages of using credit EXCEPT _____.
A)It lets you enjoy goods and services now, and pay for them later.
B)You might be tempted to buy more than you can afford.
C)It allows you to combine several purchases and make one monthly payment.
D)It gives you a record of your expenses.
3
A _____ is the maximum amount of money a creditor will allow a credit user to borrow.
A)grace period
B)credit rating
C)bankruptcy
D)line of credit
4
A finance charge is _____.
A)a time period during which no finances charges will be added to your account
B)the total dollar amount you pay to use credit
C)the amount of money that a person borrows
D)a form of security to help guarantee that a creditor will be repaid
5
Which of the following calculations will help you figure out your debt payments-to-income ratio?
A)monthly net income × monthly debt payments
B)monthly debt payments + monthly net income
C)monthly debt payments ÷ monthly net income
D)monthly net income + total credit payments
6
The _____ is the cost of credit on a yearly basis, expressed as a percentage.
A)annual percentage rate
B)interest rate
C)credit rate
D)principal
7
Many lenders believe that you have a higher stake in repaying a loan if you make a _____.
A)promise that you will pay off the loan
B)contribution to a charity
C)written statement
D)large down payment
8
The calculation for simple interest is _____ × interest rate × amount of time.
A)down payment
B)principal
C)month
D)credit rating
9
The five C's of credit include all the following EXCEPT _______.
A)cooperation
B)character
C)capacity
D)collateral
10
_______ are required to follow reasonable procedures to make sure that the information in their files is correct.
A)credit counseling services
B)cosigners
C)credit bureaus
D)thieves
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