Finance 107 Spring 06 Quiz Chapters 5-7

Student: _________________________________________________________

1. 

Which federal consumer credit law prohibits credit discrimination based on sex and marital status? 

 

A.  

Truth in Lending Act

 

B.  

Fair Credit Reporting Act

 

C.  

Fair Credit Billing Act

 

D.  

Equal Credit Opportunity Act

 

E.  

Fair Debt Collection Practices Act

 

2. 

The CCCS counseling is 

 

A.  

quite costly.

 

B.  

usually free.

 

C.  

often useless.

 

D.  

fraught with red tape.

 

E.  

available only if you declare a bankruptcy.

 

3. 

What is (are) the signal(s) of potential debt problems? 

 

A.  

paying only the minimum balance each month

 

B.  

missing payments or paying late

 

C.  

using savings to pay normal bills

 

D.  

depending on overtime to meet normal expenses

 

E.  

All of the above are the danger signals.

 

4. 

The CCCS aids families by 

 

A.  

setting up a budget for them.

 

B.  

paying off their loans.

 

C.  

providing free basic necessities.

 

D.  

providing one month free shelter.

 

E.  

relocating them in less expensive areas.

 

5. 

Which federal law protects you by requiring credit bureaus to furnish correct and complete information to creditors? 

 

A.  

Fair Credit Reporting Act

 

B.  

Truth in Lending Act

 

C.  

Fair Credit Billing Act

 

D.  

Equal Credit Opportunity Act

 

E.  

Fair Debt Collection Practices Act

 

6. 

The maximum amount of credit you are allowed by a creditor is called a(n) 

 

A.  

revolving credit.

 

B.  

line of credit.

 

C.  

convenience credit.

 

D.  

installment cash credit.

 

E.  

single lump-sum credit.

 

7. 

In addition to the counseling services of the CCCS, nonprofit services are sometimes provided by 

 

A.  

universities.

 

B.  

military bases.

 

C.  

credit unions.

 

D.  

state and federal authorities.

 

E.  

All of them may provide such services.

 

8. 

Dave's take home pay per month is $2200. What is the maximum dollar amount of debt payments he should have? 

 

A.  

$880

 

B.  

$440

 

C.  

$330

 

D.  

$220

 

E.  

$0

 


 

9. 

If you have a complaint about consumer credit, you should first 

 

A.  

try to solve your problem directly with the creditor.

 

B.  

contact your attorney.

 

C.  

file a complaint with the Better Business Bureau.

 

D.  

report it to the state consumer protection agency.

 

E.  

complain to the Federal Reserve Bank in your district.

 

10. 

When you complain about your billing error, the creditor must acknowledge your letter within ____________ days. 

 

A.  

10

 

B.  

20

 

C.  

30

 

D.  

60

 

E.  

90

 

11. 

A bank that is looking at your past payment records on your loans is most likely examining which aspect of the 5Cs of lending? 

 

A.  

character

 

B.  

capacity

 

C.  

collateral

 

D.  

capital

 

E.  

conditions

 

12. 

Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of: 

 

A.  

open-end credit

 

B.  

close-end credit

 

C.  

a line of credit

 

D.  

installment sales credit

 

E.  

none of the above

 

13. 

What should you do if your identity is stolen? 

 

A.  

Contact the fraud departments of each of the 3 major credit bureaus.

 

B.  

Ignore it and hope that it will go away.

 

C.  

Throw away all records dealing with the problem

 

D.  

Keep your bank accounts and credit card accounts open for one year.

 

E.  

All of the above.

 

14. 

In a Chapter 7 bankruptcy, a person filing for relief is called a 

 

A.  

bankrupt.

 

B.  

debtor.

 

C.  

dependent.

 

D.  

criminal.

 

15. 

What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage? 

 

A.  

0.5

 

B.  

0.33

 

C.  

1.00

 

D.  

2.00

 

E.  

none of the above

 

16. 

Installment cash credit is a 

 

A.  

loan that must be repaid in total on a specified day.

 

B.  

direct loan of money for personal purposes.

 

C.  

loan that allows the consumer to receive merchandise, such as a refrigerator.

 

D.  

down payment made on a purchase.

 

E.  

synonym for a single lump-sum credit.

 

17. 

Another name for open-end credit is 

 

A.  

revolving credit.

 

B.  

a line of credit.

 

C.  

convenience credit.

 

D.  

installment credit.

 

E.  

a single lump-sum credit.

 

 

18. 

Which of the following types of warranties is a specific agreement created by the seller or manufacturer? 

 

A.  

express

 

B.  

implied

 

C.  

full

 

D.  

contingent

 

E.  

limited

 

19. 

Which of the following legal techniques best serves low-income consumers? 

 

A.  

mediation

 

B.  

class action suits

 

C.  

legal aid societies

 

D.  

small claims court

 

E.  

consumer action panels

 

20. 

The purpose of an automobile service contract is to 

 

A.  

reduce operating costs of the vehicle.

 

B.  

cover regular maintenance.

 

C.  

provide automobile insurance at a discount.

 

D.  

repair major problems after the warranty expires.

 

E.  

stay informed of government safety recalls.

 

21. 

Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate? 

 

A.  

small claims court

 

B.  

mediation

 

C.  

legal aid society

 

D.  

arbitration

 

E.  

class action suit

 

22. 

The main purpose of Consumers Union is to 

 

A.  

evaluate the quality of products and services.

 

B.  

reduce fire hazards of home appliances.

 

C.  

handle consumer complaints from government workers.

 

D.  

represent the government in consumer complaint hearings.

 

E.  

provide environmental information on automobiles.

 

23. 

The purpose of small claims court is to 

 

A.  

regulate fair business activities.

 

B.  

provide hearing on proposed consumer protection laws.

 

C.  

allow consumers with similar complaints to take action as a group.

 

D.  

resolve minor consumer complaints.

 

E.  

assist low-income consumers who need legal help.

 

24. 

Melissa Morano has a concern about the deceptive advertising aimed at older consumers in her neighborhood. A government agency she might contact about this problem is the 

 

A.  

Federal Trade Commission.

 

B.  

Better Business Bureau.

 

C.  

Consumers Union.

 

D.  

Underwriters Laboratories.

 

E.  

Bureau of Labor Statistics.

 

25. 

Small claims court requires a person to have 

 

A.  

written testimony.

 

B.  

a case involving less than a set amount.

 

C.  

representation by an attorney.

 

D.  

evidence screened in advance of the hearing

 


 

26. 

A government agency designed to provide consumer information and assist with consumer complaints is the 

 

A.  

Better Business Bureau.

 

B.  

Consumers Union.

 

C.  

Underwriters Laboratories.

 

D.  

Federal Trade Commission.

 

E.  

Consumer Action.

 

27. 

A 32-ounce package selling for $1.60 would have a unit price of 

 

A.  

$1.60.

 

B.  

$2.00 a pound.

 

C.  

5¢ an ounce.

 

D.  

80¢ a quart.

 

E.  

12¢ an ounce.

 

28. 

The opportunity costs associated with consumer purchases refer to the cost of an item and any finance charges if the item was purchased on credit. 

True    False

29. 

If you desire some assurance of quality when buying a used car, the best warranty is usually offered by a(n) 

 

A.  

auction company.

 

B.  

private party.

 

C.  

used car dealer.

 

D.  

fleet sales company.

 

E.  

new car dealer.

 

30. 

The first step in the buying process involves information gathering. 

True    False

31. 

A government agency designed to provide consumer information and assist with consumer complaints is the 

 

A.  

Better Business Bureau.

 

B.  

Consumers Union.

 

C.  

Underwriters Laboratories.

 

D.  

Federal Trade Commission.

 

E.  

Consumer Action.

 

32. 

Mike Jocobs is planning to lease an automobile. In an effort to minimize the price of the vehicle being leased, Mike should compare the ____________ at different leasing companies. 

 

A.  

down payment

 

B.  

capitalized cost

 

C.  

money factor

 

D.  

residual value

 

E.  

number of payments

 

33. 

Overspending is a common cause of financial difficulties. 

True    False

34. 

A cooperative housing arrangement involves 

 

A.  

government-supported rental units.

 

B.  

a nonprofit organization.

 

C.  

individual ownership of a living unit in a building.

 

D.  

factory built and on-site assembly.

 

E.  

housing units owned by a real estate developer.

 


 

35. 

Which of the following is an example of a conventional mortgage? 

 

A.  

an FHA mortgage

 

B.  

a buy down

 

C.  

a fixed rate mortgage

 

D.  

a shared appreciation mortgage

 

E.  

a home equity loan

 

36. 

Which of the following expenses is paid from an escrow account? 

 

A.  

title insurance

 

B.  

property insurance

 

C.  

points

 

D.  

loan application fee

 

E.  

real estate agent's commission

 

37. 

A real estate agent can best assist a homebuyer by 

 

A.  

obtaining funds for a down payment.

 

B.  

setting the purchase price.

 

C.  

offering new home warranties.

 

D.  

assisting in getting a mortgage.

 

38. 

As Wally Quinten conducts an investigation of property value factors, most real estate experts tell him that ____________ most influences the housing values in an area. 

 

A.  

community pride

 

B.  

style of homes

 

C.  

zoning laws

 

D.  

age of neighborhood

 

E.  

quality of schools

 

39. 

The purpose of a counteroffer is to 

 

A.  

negotiate the purchase price.

 

B.  

reduce mortgage payments.

 

C.  

lower real estate property taxes.

 

D.  

avoid paying points at closing.

 

E.  

avoid paying the real estate agent's commission.

 

40. 

Earnest money has the purpose of 

 

A.  

paying real estate property taxes.

 

B.  

reducing the mortgage interest rate.

 

C.  

serving as good faith by a homebuyer.

 

D.  

paying the real estate agent's commission.

 

E.  

being a mortgage application fee.

 

41. 

Renting would be most appropriate for people who 

 

A.  

want to reduce their taxes.

 

B.  

have difficulty establishing credit.

 

C.  

have limited funds currently available.

 

D.  

enjoy remodeling their residence.

 

E.  

desire the financial benefits of increased equity.

 

42. 

A common financial risk of home ownership is that 

 

A.  

interest rates may change with a conventional mortgage.

 

B.  

property values may decrease.

 

C.  

mortgage interest is not tax deductible.

 

D.  

only a portion of real estate taxes are tax deductible.

 

43. 

A common opportunity cost associated with renting is 

 

A.  

interest lost on the down payment.

 

B.  

interest lost on closing costs.

 

C.  

property taxes.

 

D.  

maintenance costs.

 

E.  

interest lost on the security deposit.

 


 

44. 

A cost associated with home buying would be 

 

A.  

renter's insurance.

 

B.  

the security deposit.

 

C.  

annual appreciation of the property.

 

D.  

property taxes.

 

E.  

interest lost on the security deposit.

 

45. 

Refinancing of a mortgage is recommended when 

 

A.  

interest rates rise.

 

B.  

interest rates fall.

 

C.  

the escrow account balance declines.

 

D.  

two or more points are required by the lender at the time of closing.

 

46. 

A conventional mortgage usually involves 

 

A.  

a variable interest rate.

 

B.  

a government guarantee.

 

C.  

a balloon payment.

 

D.  

equal payments.

 

E.  

a payment cap.

 

47. 

A home equity loan is also referred to as a ____________ mortgage. 

 

A.  

shared appreciation

 

B.  

graduated payment

 

C.  

growing equity

 

D.  

second

 

E.  

buy down

 

48. 

The legal document involved in renting an apartment is called a(n) 

 

A.  

service contract.

 

B.  

mortgage.

 

C.  

lease.

 

D.  

security deposit.

 

E.  

escrow account.

 

49. 

Ownership of an individual housing unit in a building is commonly called 

 

A.  

a cooperative.

 

B.  

modular housing.

 

C.  

manufactured housing.

 

D.  

a condominium.

 

E.  

zoned housing.

 

50. 

Prefabricated housing refers to 

 

A.  

nonprofit ownership.

 

B.  

government leasing of living units.

 

C.  

rental units available to government employees.

 

D.  

ownership available to low-income individuals.

 

E.  

partially assembled housing in factories.

 

I pledge that my answers on this test are my own and that I have not received help from or given help to another student.

 

 

 

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