WorksheetsManaging Credit Unit 4 Final Exam Review
Total questions: 27
Worksheet time: 14mins
Which of the following statements comparing credit and debit cards is TRUE?
Far more businesses accept credit cards than debit cards
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
Credit card companies provide you with a monthly statement, while debit cards do not
With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
Which of the following is most likely to represent a fixed rate, secured debt?
A student loan
A credit card
A prepaid debit card
An auto loan
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
Explore whether a free or non-profit credit counseling service could help
When loans are amortized, monthly payments are ______ , while the amount of your monthly payment applied to interest ______ and the amount of your monthly payment applied to the principal ______ over time.
Constant, Increases, Increases
Constant, Decreases, Increases
Variable, Decreases, Increases
Variable, Decreases, Decreases
Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?
Put in $0 for your down payment, and choose a loan with a short term length
Put in $2500 for your down payment, and choose a loan with a short term length
Put in $3500 for your down payment, and choose a loan with a long term length
Put in $5000 for your down payment, and choose a loan with a long term length
Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?
All 3 cards are completely different
Debit cards and prepaid debit cards are the same
Debit cards and credit cards are the same
All 3 cards are completely the same
Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.
If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest
If you pay your previous balance in full after the due date, the credit card company will not charge you interest
25 days is an exceptionally long period without paying a credit card bill
The 25 days after the end of the billing cycle is referred to as the grace period
A loan with a shorter term length will have ________ monthly payments, and you will pay ________ in total interest.
(a)
Select the statement below that accurately describes a characteristic of a credit card.
You owe the same payment every month
You must have money deposited into a checking account to use the credit card for purchases
Making full payments on-time every month is the only way to avoid interest charges
They do not charge interest
Which of the following statements is CORRECT about secured loans?
They are a good choice to use for student loans
If the borrower does not make payments, the lender can repossess the item
In the event of default, the borrower loses nothing except for the down payment
They usually have higher interest rates as compared with unsecured loans
An excellent credit score will help with which aspect of car financing?
Bargaining for a great sales price
Receiving a large down payment
Qualifying for a low interest rate
Having a wide selection of term lengths
Which of these credit payback strategies would lead to the HIGHEST overall cost?
Paying off your credit card bill in full every month
Paying 20% of your credit card balance every month on time
Making the minimum payment (3% of your credit card balance) every month on time
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?
$200
$800
$1000
$1800
Which of the following statements is true about this Schumer Box?
Depending on your creditworthiness, the APR for a borrower will always either be 8.99%, 10.99% or 12.99%
There is an introductory APR that is valid only for 1 year, but then the permanent APR is lower than that at 8.99%.
You will never be charged an APR higher than 14.99%
A 28.99% APR may be applied to your account for late payment
Which word represents the total cost of the item you’re purchasing on credit minus any down payment you make upfront?
Principal
Term
Interest rate
APR
Each of the following represents an installment loan EXCEPT...
Home mortgage
Auto loan
Student loan
Credit card
Which of these actions would most likely decrease a person’s net worth for at least the next 6 months?
Use a loan to buy a brand new car
Work 10 hours of overtime each week and put all extra earnings into a savings account
Work 10 hours of overtime each week and use all extra earnings to pay down student loan debt
Open 3 new credit cards but don’t spend any money on them
Which statement is true of both debit AND credit cards?
Both can trap you in an endless cycle of debt if you’re not careful
Both allow you to make purchases in a store or online
Both typically have interest rates between 10-30%
Both require you to pay a minimum monthly payment when your bill arrives
Felix opens a credit card with no annual fee, so he assumes that using the credit card regularly will be absolutely free for the next two years while he finishes grad school. Why is his assumption incorrect?
Unless he pays the whole bill every month, he will pay interest according to his APR
He will automatically pay penalty fees if he uses his credit card for more than 3 consecutive months
If his grace period is any longer than 10 days, he will have to pay fees
He will need to pay a separate student fee because he is still in grad school
If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?
Pay the minimum monthly payment
Pay $100 per month for 10 months
Pay $250 per month until it’s paid off
Don’t make any payments until you have the full $1000 saved, regardless of how long that takes
As you move through your payment schedule on an amortized loan, what will happen to the interest portion of each month’s payment?
The interest portion will grow
The interest portion will shrink
The interest portion will stay the same
The interest portion will sometimes grow and sometimes shrink
It’s time for Roxanne to start repaying her student loans, which are amortized over the next ten years. Her first month’s payment due is $396. How much should she expect to owe next month?
Substantially less than $396
Slightly less than $396
Exactly $396
Slightly more than $396
You’re debating whether to buy a trendy fall jacket that costs a whopping $200! You have it sitting in your online cart, and you see there’s a “Buy Now, Pay Later” option available for the jacket. Which best describes an example of how that would work?
You pay the full $200 now, but they wait a month to send it to you, giving you the chance to cancel, penalty free, if you change your mind
You pay $100 right now, you receive the jacket, and you owe $100 more a year later on the anniversary of your purchase date
They ship you the jacket now, and you owe four $50 payments, once every 2 weeks, until the jacket is paid in full
You reserve the jacket now, you pay as much or as little as you want in each payment, and when you eventually get to $200, they send you the jacket
Antonio has $4000 saved to use for a down payment, and he’s about to buy a car that costs $29,000. How much would you expect his loan principal to be?
$4000
$25,000
$33,000
$29,000 x his interest rate
If you were offered two auto loan options with the same principal and interest rate, but one was a 48-month loan and one was a 72-month loan, which outcome below will reflect the impact of that difference in term?
The 48-month loan will cost less money overall
The 48-month loan will have lower monthly costs
The 48-month loan will take longer to pay off
The 48-month loan will always be a better choice
Shonda’s mom recommends that she spend a year building her credit history and boosting her credit score before she applies for a loan to buy her dream car, which costs $54,000. Why is that good advice?
A good credit score will reduce her down payment
A good credit score will reduce her principal
A good credit score will reduce her interest rate
A good credit score will allow her to pay the full $54,000 in cash
