Practice Quizzes
Quiz Review

1. Home equity/second mortgage loans have two advantages over most loans.  They are
A: tax deductibility and lower interest rates
B: tax deductibility and longer terms
C:
longer terms and quarterly payments
D:
ease of obtaining and longer payment terms
2. Student loans are a good deal because you pay part of the interest and the rest is subsidized
A: by the bank or lender
B: the federal government
C:
your parents
D:
the educational institution
3.  The Truth in Lending Act requires the __________ and __________ be included in the loan disclosure statement
A: APR, collateral
B: finance charges, collateral
C:
APR, finance charges
D:
method of interest calculation, interest rate
4. Which one of these clauses is not in a typical loan contract?
A: recourse
B: deficiency payments
C:
acceleration
D:
heir settlement
5. Calculate the interest on $6,000 borrowed at 9% simple interest for 9 months.
A: $405
B: $270
C:
$360
D:
$540
6.  Cindy Dolenz was told one of these was a less expensive form of loan.   Advise her
A: financing from retail stores
B: credit union
C:
finance company
D:
small loan company
7.  The total nonmortgage debt payments divided by the total monthly take-home pay is the
A: the 28 / 36 rule
B: current ratio
C:
debt limit ratio
D:
debt maximum rule
8. Brenda found out that the 28/36 rule considers you a good credit risk when
A: total mortgage payments fall below 28% of her gross monthly income
B: her mortgage payment falls below 28% of her monthly take-home pay
C:
total debt payments are less than 36% of her monthly gross income
D:
both  a  and  c
9.   A Chapter 13 personal bankruptcy is characterized by all of these except one.
A: creditors vote on restructuring your debt repayments
B: continue to pay most of your debts
C:
maintain title and possession of your assets
D:
a new debt repayment schedule
10.  Suppose that you are interested in buying a home, but are unsure of how much you can afford.  What is the best way to determine your prospects for obtaining a mortgage?
A: calculate your debt limit ratio
B: figure the 28/36 rule
C:
forget it at this time
D:
compare finances with some friends
11. Many lenders will hold him to the 28/36 rule in evaluating his application for a mortgage.   What does the 36 mean?
A:  a down payment of 36 months is required
B: a down payment of 36% is required
C:
debt payments including mortgage must be less than 36% of his gross monthly income
D:
debt payments must be less than 36% of his monthly take-home pay
12. The “Repo Man” recently repossessed your car for failure to make payments.  You still owed $5,000 on the car, but since it was always broken, you were glad to get rid of it anyway.  The banks sold the car at a wholesale auction for $3,000.  The bank also paid the “Repo Man” $200 and attorney fees of $300 for the paperwork.  What are you liable for?
A: $0, repossession means the bank must “exonerate” the debt.
B: $500
C:
$2,000
D:
$2,500
13. You are considering a home equity loan.  Your marginal tax bracket is 28 percent.  You want to borrow $50,000 and are quoted a rate of 12%.  How much would you save each year if you use the tax-deductible home equity loan?
A: $1,680
B: $14,000
C:
$36,000
D:
$4,320
14. The quoted rate on a home equity loan is 10% and you are in a 28 percent marginal tax bracket.  What is the effective after tax rate on this loan?
A: 5.4 %
B: 7.2 %
C:
4.1 %
D:
2.8 %
15. You have just obtained a loan for a new home movie system under the simple interest method.  You have borrowed $12,000 for 9 months at an annual rate of 10%. Your marginal tax rate is 28 percent. What are the total interest charges you would pay if the loan is paid off on time?
A: $1,200
B: $1,080
C:
$900
D:
$648
16.A loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a/an _________?
A: fully amortized loan
B: installment loan
C:
secured loan
D:
balloon loan
17. A short-term loan that provides funding until a longer-term loan can be secured is called a/an ___________
A: bridge loan
B: gap loan
C:
straddle loan
D:
amortized loan
18.  A/an __________ calls for the repayment of both the interest and the principal at regular intervals and is commonly referred to as loan amortization?
A: term loan
B: installment loan
C:
simple interest loan
D:
secured loan
19. What is the interest rate banks charge to their most creditworthy customers?
A: base rate
B: blue chip rate
C:
prime rate
D:
premier rate
20. A/an __________ is tied to a market interest rate, such as the prime rate or the 6-month Treasury Bill rate?
A: movable rate loan
B: convertible rate loan
C:
volatile rate loan
D:
variable rate loan
21.  Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment on the due date.  Technically you ___________
A: are in default
B: are bankrupt
C:
have 15 days before you are actually late.
D:
have 30 days before any action can be legally taken.
22.  Loans that are aimed at individuals with jobs and checking accounts but who needs some funds to tide them over until the next paycheck are commonly called____________
A: bridge loans
B: payday loans
C:
gap loans
D:
spread loans
23. Which of the following would likely be the lowest -cost source of funds, all other things considered equal?
A: small loan companies
B: commercial banks
C:
home equity loans
D:
sales financing companies
24.  What is the loan clause stating that if you default on a secured loan, the lender can repossess whatever is secured, as well as bill you for the difference if that repossession does not cover what you owe?
A: insurance clause
B: default clause
C:
recourse clause
D:
deficiency payments clause
25.  What it the loan clause that provides for the entire loan balance to become due immediately should you miss a payment?
A: acceleration clause
B: default contingency clause
C:
insurance agreement clause
D:
collateral clause
 

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