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Home arrow Student Resources arrow Study Guide arrow Chapter 9: Personal Loans arrow Chapter 9 Multiple Choice Quiz

Chapter 9 Multiple Choice Quiz



 This activity contains 21 questions.

Question 1.
When applying for a loan, borrowers will probably need to provide information regarding their
 
End of Question 1


Question 2.
A loan contract typically does not specify
 
End of Question 2


Question 3.
A ___________ maturity for a loan results in _________ monthly payments.
 
End of Question 3


Question 4.
___________ is not a common type of interest rate used on personal loans.
 
End of Question 4


Question 5.
________________ measures the finance expenses (including interest and other expenses) on a loan on an annualized basis.
 
End of Question 5


Question 6.

The following information applies to questions 6 through 8.

Bill Wadley has a choice of borrowing $5,000 over the next year from either Bank A, Bank B, or Bank C. Bank A offers an interest rate of 12 percent on its loan. Bank B offers an interest rate of only 6 percent, but charges $150 at the time the loan is granted. Bank C offers an interest rate of 8 percent, but charges $100 at the time the loan is granted.

Based on this information, Bank B has an annual percentage rate of __________ percent.

 
End of Question 6


Question 7.
Based on this information, Bank C has an annual percentage rate of __________ percent.
 
End of Question 7


Question 8.
Based on this information, the most attractive interest rate is offered by
 
End of Question 8


Question 9.

The following information applies to questions 9 through 12.

You have just been granted a loan of $3,500 that is based on the simple interest method. The loan has an annual interest rate of 10 percent and requires you to make 12 equal monthly payments of $307.71 each.

How much of the payment in the first month represents the interest payment?
 
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Question 10.
What is the outstanding loan balance after you make the first payment?
 
End of Question 10


Question 11.
What amount of the payment in the second month represents payment of interest?
 
End of Question 11


Question 12.
Assume instead that the loan described above is based on the add-on interest method. Your monthly payment would be
 
End of Question 12


Question 13.
In general, monthly payments determined using the add-on interest method are ________ monthly payments determined using the simple interest method.
 
End of Question 13


Question 14.
In determining the credit limit on a home equity loan, which of the following methods is not commonly used?

 
End of Question 14


Question 15.

The following information applies to questions 15 and 16.

Five years ago, you purchased a $150,000 home. Your initial down payment was $30,000, and you financed the remainder with a mortgage. Your mortgage payments over the last five years added an additional $15,000 of equity. Your home is currently worth $175,000.

Using the limit based on equity invested method and assuming the lender allows you to borrow 70 percent of the value of the equity in the home, the maximum amount of a home equity loan you are eligible for is
 
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Question 16.
Using the limit based on the market value of equity and assuming the lender allows you to borrow 70 percent of the value of the equity in the home, the maximum amount of a home equity loan you are eligible for is
 
End of Question 16


Question 17.
You borrowed $20,000 with a home equity loan to buy a new car. You paid $2,000 in interest on the home equity loan last year. If your marginal income tax rate is 27 percent, your tax savings last year were
 
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Question 18.
When planning to purchase a car, you should consider
 
End of Question 18


Question 19.
Which of the following is not true with respect to purchasing a car online?
 
End of Question 19


Question 20.
Which of the following is not a disadvantage of leasing?
 
End of Question 20


Question 21.
From a cost perspective, it is always more advantageous to This is not a good question - it's tricky - there's no page reference
 
End of Question 21





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