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Personal Finance Study Set 15

Business

Quiz 7 :

Choosing a Source of Credit: the Costs of Credit Alternatives

Quiz 7 :

Choosing a Source of Credit: the Costs of Credit Alternatives

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Buying on credit is almost always cheaper than paying cash.
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True False
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False

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With the add-on interest method,interest is calculated on the full amount of the original principal.
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True False
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True

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After you have selected a product,you should buy it immediately before the store runs out of it.
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True False
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False

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You can often obtain medium-priced loans from commercial banks,federal savings banks,and credit unions.
True False
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When more than one payment is made on a simple interest loan,the method of computing interest is known as the declining balance method.
True False
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The fairest method of calculating interest on a credit card is the average daily balance method.
True False
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The finance charge is the total dollar amount you pay to use credit.
True False
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The annual percentage rate is the percentage cost (or relative cost)of credit on a yearly basis.
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The most basic method of calculating interest is the compound interest calculation.
True False
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If you want to minimize your borrowing costs,you may need to accept conditions that reduce the risk for your lender.
True False
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If you want to take advantage of the interest-free period on your credit card,you must pay your bill in full every month.
True False
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The two most common methods of calculating interest are compound and simple interest formulas.
True False
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Two key concepts that you should remember when borrowing are the finance charge and the annual percentage rate.
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Inflation increases the purchasing power of money.
True False
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If creditors give you no credit for payments made during the billing period,it is called the adjusted balance method.
True False
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The Truth in Lending law does not set the interest rates or tell the creditor how to make interest calculations.
True False
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If you pledge property or other assets as collateral,you will probably pay a higher interest rate on your loan than you would without collateral.
True False
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You can deduct the interest paid on consumer loans on your income tax return.
True False
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You may be able to borrow at a lower interest rate if you accept a shorter-term loan.
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Parents or family members are often the source of the least expensive loans.
True False
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