Personal Finance Chapter 4

1.

1 point

Why do people think that home equity loans
are good?

Because of the tax refund

They serve as a substitute for an emergency fund

It’s a way to consolidate debt

All of the above

2.

1 point

What is NOT true in regards to making
minimum payments on a credit card?

Minimum payments are designed to keep you in debt, therefore making credit card companies more money.

As long as you can make minimum payments, the balance you owe doesn’t matter.

A minimum payment is usually a much smaller % of the balance than the average interest rate.

Minimum payments leave you in debt longer

3.

1 point

You need a credit card in order to rent cars and check into hotels.

True

False

4.

1 point

Which statement is NOT TRUE about debt consolidation?

You only have one payment to deal with.

Smaller payments equals more time in debt.

Your lower interest loans also get rolled into the deal so you end up with minimal savings.

You end up saving money because you are getting a lower interest rate.

5.

1 point

What can you conclude about the history of
credit timeline?

Credit has always been popular.

Credit has evolved into a way of life over a relatively short period of time.

Credit was a popular for our great grandparents.

The use of credit has not evolved at all.

6.

1 point

The most expensive way to purchase a new car
is by:

Leasing

Paying cash

Buying last year’s model

Both a and b

7.

1 point

Kevin has the following debts: home equity loan, $24,000;
Visa, $1,200;
student loan,$5,000;
car loan, $12,000.
How should he prioritize his debt snowball?

Home equity, Visa, student loan, car

Visa, student loan, car, home equity

Visa, car, student loan, home equity

Need the interest rate of each loan to do the debt snowball accurately

8.

1 point

Which of the following is a step out of debt?

Quit borrowing money

Sell something

Using the debt snowball

All of the above

9.

1 point

How is a debit card like a credit card?

They both can have the Visa or MasterCard logo.

A debit card can have a minimum monthly finance charge.

A debit card can be swiped and require a signature like a credit card.

Both a and c

10.

1 point

What is the problem with using credit cards if
you pay your balance off each month?

You are more apt to buy on impulse rather than thinking about a purchase.

This is the only responsible use of credit.

You are spending an average of 12%-18% more when you use a credit card.

Both a and c

11.

1 point

What is the best way to buy a car?

Leasing

Purchase used (two years or older)

0% financing on new or used

Purchase new at the end of the year

12.

1 point

Which type of mortgage is the best to take out?

Adjustable Rate Mortgage

Fixed 30-year

Balloon Mortgage

Fixed 15-year

13.

1 point

The typical millionaire drives a reliable, used car.

True

False

14.

1 point

Which is true about the myth, “I will take out
a 30-year mortgage and pay it off early”?

The monthly payment on a 15-year mortgage is significantly more than a 30-year mortgage.

All of the above

Other important things come up and it usually does not get paid off early.

People generally will pay it off early if they set that as a goal.

15.

1 point

The debt snowball begins with your highest interest rate debt.

True

False

16.

1 point

Spending cash is less painful than using a debit card.

True

False

17.

1 point

Which of the following is NOT a myth?

Playing the lotto will make you rich.

78% of Americans do not pay off their credit card balance every month.

Teenagers will learn to handle money responsibly if given a credit card.

Debt properly used is a tool to build wealth.

18.

1 point

Loaning money to a friend or relative is never a good idea.

True

False

19.

1 point

What concept likely had an impact on
McDonald’s when they began accepting
credit cards?

People spend 12-18% more using plastic, so the average price of an order increased.

People found it more convenient to pay with a credit card, so the average price of an order increased.

There was no change in the average price of an order.

Both a and b

20.

1 point

There is nothing wrong with using a credit card if you pay your balance in full every month.

True

False

21.

1 point

Which is true about the marketing of credit
cards to teenagers?

Colleges are losing more students to credit card debt problems than to academic failure.

All of the above

Teens are the number one target of credit card companies across America.

Brand loyalty to your first card is incredible, so credit card companies work hard to become the first issuer.

22.

1 point

Which is true about making purchases with
credit cards?

You spend 12-18% less when using a credit card.

You spend 12-18% more when using a credit card.

You are more likely to experience the “pain” when purchasing with a credit card.

None of the above

23.

1 point

Which statement is NOT true about depreciation?

A new car loses 40% of its value in the first four years.

When buying slightly used items, you minimize depreciation.

Depreciation and interest accounts for more than half the annual costs of owning a car.

Depreciation doesn’t matter if you pay for something using cash.

24.

1 point

Which is NOT part of the debt snowball?

List your debt from highest interest rate to lowest interest rate.

Put every extra dollar you can on the smallest debt.

Pay minimum on all debts except the smallest one.

The minimum payment from a paid off debt goes toward the new payment amount of the next debt.

25.

1 point

In which type of loan would you use your
house for collateral?

15-year fixed

Home Equity

Adjustable Rate

Balloon Mortgage

26.

1 point

Henry Ford and J C Penney were pioneers of the use of credit.

True

False

27.

1 point

Which of the following is true about
using credit:

When using credit, one spends more.

It’s the same as using cash.

Using credit neurologically registers as pain.

When using credit, one spends less.

28.

1 point

If you absolutely have to loan money to help a friend or relative, co-signing is the way to go.

True

False

29.

1 point

Cash advance and title pawning businesses charge roughly the same percentage rates and fees on loans as a credit card company.

True

False

30.

1 point

The key to building wealth is:

A good education and income

Staying debt free

Driving reliable used cars

Fixed rate, 15 year mortgages

31.

1 point

Payday lending and cash advance companies are
aggressively targeting which group of people?

Military

Teens

College graduates

Elderly

32.

1 point

If 80% of millionaires are first generation rich, than one can conclude:

They fell for the myths that society lives by

They started with nothing, made smart decisions, and became millionaires

The other 20% are not millionaires

They invented something

33.

1 point

The main difference between debit and credit
cards is:

A debit card requires that you have the cash available in the account; a credit card doesn’t.

A debit card does not offer the same protections as a credit card.

A credit card has the visa or MasterCard logo; a debit card doesn’t.

A credit card requires that you have the cash available in the account; a debit card doesn’t.

34.

1 point

Why should you avoid lending money?

The relationship changes

Often the relationship ends completely

The person borrowing the money is in bondage to you

All of the above

35.

1 point

Why is gazelle intensity so important in
getting out of the cycle of debt?

So you don’t get stuck in debt

To help build momentum

It isn’t that important

Both a and b

36.

1 point

Baby Step 2 is:

Pay off all debt using the debt snowball.

Take a 15-year vs. a 30-year mortgage.

A fully funded emergency fund.

Save 15% of income for retirement.

37.

1 point

How much more do you spend on purchases
when you use credit vs. cash?

12-18%

10-20%

no difference in spending

3-5%

38.

1 point

Which is a danger of co-signing a loan?

If the person doesn’t pay, you are responsible for a portion of the debt.

If the person doesn’t pay, you become responsible for the debt.

You know them and trust them so cosigning is not dangerous.

The bank wouldn’t give that person a loan without your help.

39.

1 point

Living without debt in today’s society requires a paradigm shift.

True

False