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Multiple Choice Quiz
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1

The most expensive loans are loans received from parents or family members.
A)True.
B)False.
2

If you want to reduce your borrowing costs you may need to accept conditions that lower the risk for your lender.
A)True.
B)False.
3

The majority of personal bankruptcies are filed under Chapter 13 of U.S. bankruptcy code.
A)True.
B)False.
4

Your credit card charges you a 2% fee for cash advances and has an APR of 18%. It also starts charging you interest on cash advances as soon as you get the advance. You get a cash advance of $600 on the first day of the month. You get your credit card bill at the end of the month. What is the total finance charge you will pay on this cash advance for the month?
A)$12
B)$9
C)$21
D)$0
E)None of the above
5

You borrow $1000 and repay the loan over 2 years with monthly payments. Over the two years you incur $163.68 in interest. Using the approximation formula in your textbook, what is the APR on this loan?
A)16.37%
B)15.71%
C)30.22%
D)32.66%
E)None of the above
6

You borrow $1000 and have been told that you will repay it in 4 payments and that your interest rate is 12% on a simple interest loan and that your payments will be determined using the declining balance method. You have determined that your payments will be $280, $272.50, $265 and $257.50. What is the APR on this loan? (Use the approximation formula.)
A)12%
B)19.2%
C)12.18%
D)21.82%
E)None of the above
7

Bill Stockwell has two children named Ann and Ben. It is Ben's birthday and Bill decides to buy Ben a TV for his room. However, he decides that if he buys a TV for Ben he must also buy a TV for Ann. So Bill goes to Circuit City and buys two 25 inch Sony TV's. Which of the reasons for the over-indebtedness of families is most likely the reason for these purchases?
A)The use of money to punish a spouse
B)The overindulgence of children
C)Emotional problems
D)Keeping up with the Joneses
E)All of the above are reasons Sue Ann goes to the mall.
8

_____________ is the interest computed on principal only and without compounding.
A)Simple interest
B)Compound interest
C)Add-on interest
D)Discount interest
9

_____________ is any type of insurance that ensures repayment of the loan in the event the borrower is unable to repay it.
A)Credit insurance
B)Life insurance
C)Property and casualty insurance
D)Health insurance
10

_____________ is one type of personal bankruptcy plan where a debtor with regular income develops and proposes a payment plan to extinguish his or her debt.
A)Chapter 7 bankruptcy
B)Chapter 13 bankruptcy
C)Chapter 11 bankruptcy
D)Chapter 66 bankruptcy





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