Deck 14: Installment Buying

Question 1

The average daily balance is the same as the daily balance.

Answer 1

False

Question 2

The daily balance is the previous balance plus cash advances plus purchases minus any payments.

Answer 2

True

Question 3

The U.S. Rule can be applied to open credit payments.

Answer 3

True

Question 4

The Fair Credit and Charge Card Disclosure Act of 1988 is optional advice to credit card companies.

Question 5

Finance charge equals total of all monthly payments minus amount financed.

Question 6

A billing cycle is always 30 or 31 days.

Question 7

Average daily balance is equal to sum of daily balances divided by number of days in the billing cycle.

Question 8

The amount financed equals the cash price plus the down payment.

Question 9

Amount financed is equal to:

A) Cash price times down payment
B) Cash price plus down payment
C) Cash price minus down payment
D) Cash price divided by down payment
E) None of these

Question 10

The monthly payment is calculated by totaling the finance charge and amount financed and dividing that by the number of payments of the loan.

Question 11

Amortization is not a payment process.

Question 12

Revolving charge accounts must be paid off completely by the end of the month.

Question 13

APR cannot be calculated by use of tables.

Question 14

The cost of credit reports would be included in the amount financed.

Question 15

The Truth in Lending Act requires that the APR be stated accurately to the nearest 1/4 of 1%.

Question 16

The Truth in Lending Act regulates interest charges.

Question 17

The finance charge is equal to the total of all monthly payments:

A) Plus amount financed
B) Minus amount financed
C) Divided by amount financed
D) Multiplied by amount financed
E) None of these

Question 18

Today most companies calculate the finance charge on their credit card accounts as a percentage of the yearly balance.

Question 19

The APR represents the stated interest rate.

Question 20

Calculating APR by table lookup requires that the total amount financed be divided by the interest charge and then multiplied by 100.

Question 21

The APR represents the:

A) Stated rate of interest
B) True effective quarterly interest rate charged by seller
C) True effective annual rate of interest charged by buyer
D) True effective annual rate of interest charged by seller
E) None of these

Question 22

A condo in Orange Beach, Alabama, listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?

A) $7,518
B) $6,014.40
C) $6,041.20
D) $7,815.00
E) None of these

Question 23

Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda's monthly payment?

A) $1,776
B) $1,402
C) $1,240.80
D) $1,420.80
E) None of these

Question 24

Ed Sloan bought a new Explorer for $22,000. He put down $7,000 and paid $290 for 60 months. The total finance charge to Ed is:

A) $15,000
B) $17,400
C) $2,400
D) $4,200
E) None of these

Question 25

The average daily balance is equal to the sum of daily balances:

A) Plus number of days in billing cycle
B) Minus number of days in billing cycle
C) Divided by number of days in billing cycle
D) Multiplied by number of days in billing cycle
E) None of these

Question 26

Given a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?

A) $50,236.80
B) $5,023.68
C) $545.76
D) $54,576
E) None of these

Question 27

In calculating the daily balance, cash advances are:

A) Added in
B) Subtracted out
C) Sometimes added in
D) Sometimes subtracted out
E) None of these

Question 28

John Sullivan bought a new Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank's loan was for 60 months. Finance charges totaled $4,900. His monthly payment is:

A) $313.33
B) $323.33
C) $332.33
D) $232.33
E) None of these

Question 29

Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen's total finance charges?

A) $457,425.60
B) $606,823.20
C) $626,863.20
D) $600,000.00
E) None of these

Question 30

Darlene Ramirez bought a home for $140,000. She put 20% down with a mortgage rate of 7.5% for 25 years. Her yearly payments are:

A) $1,776
B) $9,932.16
C) $12,415.20
D) $9,329.61
E) None of these

Question 31

Mia Lane bought a high-definition television for $7,500. Based on her income, she could afford to pay back only $600 per month. There is 1 ½% monthly interest charge on the unpaid balance. The U.S. Rule is used in the calculation. At the end of month 1, the balance outstanding is:

A) $6,012.50
B) $5,012.50
C) $4,012.50
D) $3,012.50
E) None of these

Question 32

Open credit in a revolving charge plan results in:

A) One purchase per month
B) The U.S. Rule being applied to each purchase
C) As many cash purchases till credit limit is reached
D) As many charged purchases till credit limit is reached
E) None of these

Question 33

Most companies calculate the finance charge on credit card accounts as a percentage of the:

A) Daily balance
B) Weekly balance
C) Average daily balance
D) Average weekly balance
E) None of these

Question 34

Pete Size read the following partial advertisement: Price $20,999; down payment $1,000; cash or trade; $390.85 per month for 60 months. Calculate (A) the total finance charge and (B) the APR by table lookup.
A. $3,452;
B. Between 6.25% and 6.5%

Question 35

Justin Chan bought a Scion car for a price of $8,200, putting down $800 and financing the remainder with 60 monthly payments of $179.99. The APR by table lookup is (use the tables in the handbook):

A) Close to 15%
B) Close to 14%
C) Close to 13 ½%
D) Between 16.00 and 16.25%
E) None of these

Question 36

Dan Miller bought a new Toyota truck for $28,000. Dan made a down payment of $6,000 and paid $390 monthly for 70 months. The total finance charge was:

A) $13,300
B) $5,300
C) $11,300
D) $27,300
E) None of these

Question 37

Given the following: The average daily balance is:

A) $910.34
B) $755.17
C) $810.43
D) $755.71
E) None of these

Question 38

Given:

A) 17.25% - 17.50 %
B) 17.00 %
C) 16.75 %
D) 16.50 %
E) None of these

Question 39

Which one of the following statements is incorrect?

A) APR is the true effective annual interest charged by sellers
B) The Truth in Lending Act regulates interest charges
C) APR represents the true effective annual rate of interest
D) None of these

Question 40

Vicki King bought a Ford Explorer for $23,000. Vicki made a down payment of $6,000 and paid $305 monthly for 60 months. What is the total finance charge that Vicki paid at the end of 60 months?

Question 41

Calculate average daily balance:

Question 42

Calculate (A) the average daily balance and (B) the finance charge.

Question 43

Jane Ranch bought a tractor for $5,000. Jane has decided that she can afford to pay only $1,000 per month. Can you calculate at the end of month 2 the balance of the loan outstanding? Use the U.S. Rule. The monthly interest charged is 5% on the unpaid balance.

Question 44

Calculate APR by table lookup:

Question 45

Able Long buys a new desk for $2,400. Able will pay back $250 per month. Monthly interest is 3% on the unpaid balance. Calculate the balance outstanding after the second payment. (Use the U.S. Rule.)

Question 46

Calculate the monthly payment by using the loan amortization table:

Question 47

Calculate APR by table from this advertisement: