Question 1

Which of the following lenders is most likely to be sympathetic about legitimate payment problems?

Accepted Answer

Credit unions are member-owned and operated, and they often prioritize helping their members during times of financial difficulty. They may be more understanding and flexible when it comes to payment problems than other types of lenders. In contrast, payday advance companies and finance companies may charge high interest rates and fees, and may not be as understanding when a borrower has trouble making payments. Department stores and commercial banks may also have less flexibility and be less sympathetic.

Question 2

Anthony Newton wants to buy a new sail boat.He makes a down payment of $10,000 which represents 20% of the value of the sail boat he is purchasing.In which way is James reducing his lender's risk:

Accepted Answer

By making a larger down payment, Anthony is taking a larger stake in the asset, which reduces the lender's risk as there is more equity in the asset.

Question 3

The CCCS sometimes charges a fee if it:

Accepted Answer

The CCCS charges a fee for administering a debt repayment plan.

Question 4

Who financially supports the Consumer Credit Counseling Service?

Accepted Answer

The answer of Who financially supports the Consumer Credit Counseling...

Question 5

Patricia Newton is going to buy a new car,and she needs to apply for a loan to cover the purchase.She knows she can get a loan for up to 6 years,but she would prefer a shorter-term loan.She selects a 4-year loan.Patricia reducing her lender's risk by:

Accepted Answer

Repaying the loan faster reduces the lender's risk because the shorter loan term means less time for potential financial difficulties or changing circumstances that could affect Patricia's ability to make payments. This reduces the likelihood of defaulting on the loan, which is the main risk for the lender.

Question 6

Sandra Jennings gets a loan from General Motors Acceptance Corporation.Which type of lending institution is this?

Accepted Answer

General Motors Acceptance Corporation is a finance company, which specializes in providing loans for buying or leasing GM vehicles. Finance companies provide various types of loans, such as personal loans, auto loans, and equipment financing. They typically charge higher interest rates than commercial banks but may be more flexible in their lending criteria.

Question 7

The CCCS is basically concerned with:

Accepted Answer

The CCCS, or Consumer Credit Counseling Service, is a nonprofit organization that provides debt counseling to consumers. Its main objective is to prevent and solve the problems related to credit overextension, which can include providing debt management plans and financial education. None of the other choices accurately describe the services provided by the CCCS.

Question 8

Chuck Stallings qualifies for a credit card from J.C.Penney.Which of the following offers this type of loan?

Accepted Answer

J.C.Penney is a department store, so they offer a credit card to their customers.

Question 9

Frank West wants to borrow money for three years to purchase a new boat.He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent.By choosing the variable rate loan,Chuck is reducing the lender's risk by:

Accepted Answer

By choosing the variable rate loan, Frank is sharing the interest rate risk with the lender. This means that if interest rates increase, Frank will bear some of the cost of that increase. This reduces the lender's risk because they are not solely responsible for absorbing any potential interest rate changes.

Question 10

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

Accepted Answer

Nonprofit services may be provided by a variety of organizations, including universities, military bases, credit unions, and state and federal authorities. Therefore, the best choice is E, which includes all of the organizations listed.

Question 11

Jerrod Dean starts the month with a balance on his credit card of $1,000.On the 10^th day of the month,he purchases $200 in clothes with his credit card.On the 15^th day of the month he makes a payment on his credit card of $500.The bank charges 1.5 percent interest per month using the adjusted balance method.What would Jerrod's finance charges be for the month?

Accepted Answer

1,000 - 500 = 500; 500 F1F1F1S1F1F1F10 1.5% = $7.50.

Question 12

Most people who are in debt over their heads are:

Accepted Answer

The majority of people who are in debt are essentially honest individuals who have overspent or experienced financial hardships such as medical emergencies or job loss. It is important to avoid stigmatizing those in debt and instead focus on providing resources and support to help them manage their finances and become debt-free.

Question 13

Chuck Spencer wants to borrow money for three years to purchase a new car.He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent.By choosing the variable rate loan,Chuck is reducing the lender's risk by:

Accepted Answer

By choosing the variable rate loan, Chuck is sharing the interest rate risk with the lender since the interest rate can fluctuate over time. If he had chosen the fixed rate loan, the lender would have had to bear the entire interest rate risk.

Question 14

The CCCS aids families by:

Accepted Answer

The CCCS aids families by setting up a budget for them, which can help them manage their finances better and prioritize their spending. This can ultimately lead to less financial strain and less debt.

Question 15

Which form of bankruptcy allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time?

Accepted Answer

Chapter 13 bankruptcy allows a debtor with a regular income to create a payment plan to extinguish their debts over a period of time, typically three to five years. This option is often chosen by individuals who want to keep their assets, such as a home or car, and have a steady income to make payments towards their debts.

Question 16

The CCCS counseling is:

Accepted Answer

The CCCS counseling is usually free.

Question 17

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

Accepted Answer

In a Chapter 7 bankruptcy, the person filing for relief is referred to as the debtor. This is because they are the one who owes debts that they are unable to repay, and they are seeking relief from those debts through the bankruptcy process.

Question 18

Which one of the following is a local organization that provides debt counseling services for families and individuals?

Accepted Answer

The Consumer Credit Counseling Service is a local organization that provides debt counseling services for families and individuals. The other options listed are not specifically focused on debt counseling services.

Question 19

In a Chapter 7 bankruptcy,debtor:

Accepted Answer

In a Chapter 7 bankruptcy, the debtor is required to draw up a petition listing all assets and liabilities. This is necessary for the bankruptcy trustee to evaluate the debtor's financial situation and determine which assets, if any, can be used to pay off creditors.

Answer: C
 In a Chapter 7 bankruptcy, the debtor is referred to as a "bankrupt." This terminology is used in legal documents and court proceedings related to the bankruptcy process.

Answer: D
 In a Chapter 7 bankruptcy, the debtor is generally not absolved of alimony and child support payments. These types of debts are considered priority debts and are not dischargeable in bankruptcy.

Answer: E
 In general, educational loans are not dischargeable in a Chapter 7 bankruptcy unless the debtor can demonstrate that repaying the loans would constitute an undue hardship. However, there are certain circumstances under which some or all of a debtor's educational loans may be discharged.

Question 20

Which lender is likely to ask you to write a check for $115 before granting you a $100 loan?

Accepted Answer

Payday advance companies are known for charging high interest rates and fees. Requiring the borrower to write a check for more than the amount of the loan is a common practice among these types of lenders. This is because the lender knows that the borrower will not have the funds to cover the check when it comes time to repay the loan, which allows the lender to charge additional fees and interest.

Quiz 7: Choosing a Source of Credit: The Costs of Credit Alternatives