Test Bank For Personal Finance 12th Edition by E. Thomas Garman

Description

Test Bank For Personal Finance 12th Edition by E. Thomas Garman

1. ​Credit is a term used to describe any situation in which goods, services, or money is received in exchange for a promise to repay at a future date.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Remembering
OTHER:   Analytic
NOTES:   6.1

2. ​The most commonly used forms of credit by consumers are loans and credit cards.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

3. ​Loans generally require equal payments over a set period of time.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

4. ​Convenience use of credit is common.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

5. ​Credit cards allow repeated use of credit as long as you make the minimum monthly payment.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

6. ​Credit cards allow repeated use of credit as long as equal monthly payments are maintained over a set period of time.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
the payments will vary according to the balance of the debt on the account.

7. ​Credit cannot be used to own expensive products sooner.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
this is why most people use credit

8. ​Credit card blocking is the process whereby the merchant may notify the credit card issuer to put a hold on your account for the anticipated total amount of the charge.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

9. ​Advantages of credit use include increased protection against rip-offs and frauds.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

10. ​People can use credit to take advantage of “free” credit.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

11. ​Taking on excessive debts early in life may compromise your goal of being financially successful.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

12. ​Convenience use of a credit card is justified only if the card balance is paid in full by the end of the year.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
convenience usage should be paid off monthly.

13. ​Credit use increases future buying power.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
it decreases future buying power.

14. ​A principal problem with using credit is the opportunity cost of being less able to save and invest.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

15. ​Interest is the price of credit.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Remembering
OTHER:   Analytic
NOTES:   6.1

16. ​The lower the annual percentage rate of interest (APR), the higher the cost of credit.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
the lower the APR the lower the cost of credit.

17. ​The APR can be used to compare credit contracts with different time periods, finance charges, repayment schedules, and amounts borrowed.
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1

18. ​The Truth in Lending Act requires lenders to state the finance charge both in dollars and as an annual percentage rate (APR).
a.  True
b.  False
ANSWER:   True
POINTS:   1
DIFFICULTY:   Easy
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_1 – Legal
KEYWORDS:   Bloom’s: Remembering
OTHER:   Analytic
NOTES:   6.1

19. ​The APR expresses the cost of credit on a monthly basis as a percentage rate.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
the APR expresses the cost of credit on a yearly basis as a percentage rate.

20. ​When comparing loans from two or more sources you want to focus on the lowest monthly payment.
a.  True
b.  False
ANSWER:   False
POINTS:   1
DIFFICULTY:   Moderate
REFERENCES:   Explain reasons for and against using credit
NATIONAL STANDARDS:   United States – BB_2 – Industry
KEYWORDS:   Bloom’s: Understanding
OTHER:   Analytic
NOTES:   6.1
you should focus on the lowest APR.