# FP 120 Week 3 Quiz in class

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FP 120 Week 3 Quiz in class

Instructions
Complete the Week 3 Quiz.
Submit your responses in a MicrosoftÂ® WordÂ® document to the Assignment Files tab

Week 3

1. Which of the following is NOT correct?

a. Using credit is appropriate to pay for medical emergencies.
b. Using credit can increase the amount of money that will be available to spend in the future.
c. Using credit sometimes occurs automatically, such as for water or electricity usage.
d. Using credit allows consumers to enjoy goods and services now and pay later.

2. Many think that perhaps the greatest disadvantage of using credit is
a. The temptation to overspend
b. The convenience offered instead of using cash
c. The float from using credit
d. The increase in total purchasing power

3.2 Concept: Types and sources of consumer credit

3. Which of the following is an example of open-end credit?

a. An automobile loan
b. A department store credit card
c. An installment loan for purchasing furniture
d. A mortgage loan

4. If Vince charged \$200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?

a. \$18.00
b. \$182.00
c. \$200.00
d. \$236.00

3.3 Concept: Cost of credit using various interest formulas
5. Sam is comparing the costs of two loans. One is due in one year and the other is due in four years. Both have the same stated rate of interest. Which of the following is true?

a. The principal paid for the one-year loan will be lower than the principal paid for the four-year loan.
b. The principal paid for the one-year loan will be higher than the principal paid for the four-year loan.
c. The interest paid for the one-year loan will be lower than the interest paid for the four-year loan.
d. The interest paid for the one-year loan will be higher than the interest paid for the four-year loan.

6. If you double the monthly payment on a credit card, the loan will be paid off in

a. Half the time
b. Less than half the time
c. More than half the time
d. Not enough information is available to answer

3.4.A Concept: Effective consumer buying strategies
7. Before taking out a loan, you should ask yourself whether you can meet all your essential expenses and still afford the monthly loan payments. This can be determined by

a. Adding up basic monthly expenses then subtracting this total from gross pay
b. Asking what you plan to give up to make the monthly loan payment
c. Multiplying your take-home pay by 50% and subtracting your current loan payments
d. Adding up basic monthly expenses, subtracting this total from take-home pay and, if needed, figuring out what to give up to make the payment

8. The text identifies several phases in the buying process. The correct order of the phases is

a. Evaluating alternatives, pre-shopping activities, selection and purchase, post-purchase activities
b. Pre-shopping activities, selection and purchase, evaluating alternatives, post-purchase activities
c. Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities
d. Evaluating alternatives, selection and purchase, pre-shopping activities, post-purchase activities

9. Information gathering is part of the ________________ phase of the decision-making process.

a. Evaluating alternatives
b. Pre-shopping activities
c. Selection and purchase
d. Ordering activities

3.4.B Concept: Effective strategies when buying a car

10. The expected value at the end of a lease is called the

a. Invoice price
b. Sticker price
c. Capitalized cost
d. Residual value

11. A potential problem with having a long car loan is

a. Low monthly payments
b. Low-interest loan
c. Negative equity
d. Loan preapproval

12. All of the following are fixed operating costs for a vehicle except

a. Insurance
b. Interest on an auto loan
d. Maintenance and repairs

3.5 Concept: Cost and benefits of renting and buying

13. Which of the following is a disadvantage of renting?
Text Location: p. 223, Difficulty: Medium, Question from: Test Bank

a. Renters have fewer responsibilities than home owners.
b. Tenants cannot take tax deductions for mortgage interest and property tax.
c. Renters usually do not have to be concerned with maintenance and repairs.
d. Taking possession of a rental unit is less expensive than buying a home.

14. Donald wanted to buy a house in the country, so he sought advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he had some information incorrect. Which of the following is incorrect?

a. An advantage is that Donald can deduct mortgage interest and real estate taxes.
b. A disadvantage is that Donald is responsible for maintenance and costs of repairs and home improvements.
c. I An advantage is that the down payment required is less than the security deposit for a rental.
d. A disadvantaged is that real estate taxes are a major expense for home owners.

3.6 Concept: Process of and costs of buying a home
15. What should a home buyer consider when evaluating a house?

a. Zoning laws
b. School system
c. Property values of the community
d. All of these should be evaluated.

16. Trenton wants to buy a house but can provide only a 10% down payment. He probably will be required to have

e. Amortization
f. Escrow
g. Points
h. Private mortgage insurance

3.7.A Concept: Options to pay for college

17. What is a main difference between a subsidized and an unsubsidized Stafford loan?

a. A subsidized loan is interest-free for the first 36 months after graduation; an unsubsidized loan is interest-free for only 6 months after graduation.
b. A subsidized loan does not have to be paid back on the death of a student, but an unsubsidized loan has to be.
c. The federal government pays the interest during certain periods for a subsidized loan; students are responsible for interest at all times with an unsubsidized loan.
d. The federal government pays the interest during certain periods for an unsubsidized loan; students are responsible for interest at all times with a subsidized loan.

18. This type of financial aid typically does not need to be repaid

a. Pell grants
b. Scholarships
c. Employer tuition benefits
d. All of the above

3.7.B Concept: Repayment requirements of student loans
19. A temporary postponement of student loan payments is

a. Reduction
b. Consolidation
c. Deferment
d. Forgiveness

20. Federal student loans can be discharged only under special circumstances. Which of the following would NOT result in loan discharge?

a. Total and permanent disability
b. Partial disability
c. Death
d. Unemployment