Deck 10: Installment Buying and Revolving Charge Credit Cards

Question 1

Amortization is not a payment process.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

Cash price minus down payment

Question 4

The Truth in Lending Act regulates interest charges.

Question 5

The APR represents the stated interest rate.

Question 6

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

Question 7

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

Question 8

APR cannot be calculated by use a financial calculator.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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 15

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

Question 16

A billing cycle is always 30 or 31 days.

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

Question 20

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

Question 21

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 22

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 23

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.

Question 24

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 25

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 26

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 27

Given: $140.10 per month; cash price $5,600; down payment $0; 60 payments Cash or trade months with bank-approved credit; amount financed $5,600
Finance charge $2,806
Total payments $8,406
The APR is:

A) 17.30%
B) 17.00 %
C) 16.75 %
D) 16.50 %
E) None of these

Question 28

Bill Moore bought a stereo selling for $5,800, putting down $1,200. The payment schedule was for 48 monthly payments of $117.50. What is the APR?

Question 29

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 30

Calculate average daily balance:

Question 31

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 is:

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 32

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 33

Which one of the following statements is incorrect?

A) The Truth in Lending Act was passed in 1969
B) APR is the true effective annual interest charged by sellers
C) The Truth in Lending Act regulates interest charges
D) APR represents the true effective rate annual rate of interest
E) None of these

Question 34

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 35

Calculate the average daily balance (assume a 30-day billing cycle):

Question 36

Calculate APR (to nearest hundredth percent):

Question 37

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 38

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 39

Pete Sole bought a used car for $8,000. Pete put down $2,000 and financed the balance at 10 1/2% for 60 months. What is his monthly payment?

Question 40

Marika Katz bought a $7,000 computer. Based on her income, Marika could afford to pay back only $700 per month. The charge on the unpaid balance is 1 1/2%. The U.S. Rule is used in the calculation. Calculate the balance outstanding after the second month.

Question 41

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 42

Kerry has a $1,973 per month mortgage payment. He decides to refinance his $204,000 balance at 5% over 20 years. What is his new monthly payment?

Question 43

Pete Frank bought a computer for $4,000. Pete put down $500 and financed the balance at 10 1/2% for 36 months. What is his monthly payment?

Question 44

Neal Selznick bought a new van for $10,000. Neal put down $1,000 and paid $275 monthly for 40 months. What is the total amount of finance charge that Neal paid at the end of 40 months?

Question 45

Jamie purchased a condo for $89,900 with a down payment of 20%; her credit terms were 5% for 15 years. What is Jamie's monthly payment?

Question 46

Calculate the monthly payment:

Question 47

Calculate the finance charge:

Question 48

Jennifer Rick buys a new typewriter for $590. Jennifer puts 20% down and will pay $70 a month for the next 10 months. What is (A) the amount of the loan, (B) the total amount of monthly payments, and (C) the total of the finance charge?

Question 49

Calculate APR by table from this advertisement:

Question 50

Mary Jones just received the following statement. Can you help her calculate (A) the average daily balance and (B) the finance charge?
Finance charge is 1½% of average daily balance.

Question 51

Given a mortgage of $100,000 at 7% for 15 years, prepare a one-month amortization schedule. What is the balance after the first month's payment?

Question 52

Mel Blanc bought a new dining room set for $6,600. Mel put down $1,000 and financed the balance at 12% for 36 months. What will his monthly payment be?

Question 53

Calculate the monthly payment:

Question 54

Earl Miller buys a new desk for $2,600. Miller will pay back $270 per month. Monthly interest is 5% on the unpaid balance. Calculate the balance outstanding after the second payment. (Use the U.S. Rule.)

Question 55

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 56

Calculate APR:

Question 57

Calculate (A) the average daily balance and (B) the finance charge.
Finance charge is 2% of average daily balance.

Question 58

Shelley purchased a home in Maryland Heights, MO, for $204,000. Her down payment was 20% of the cash price, and she obtained a mortgage for 20 years at 7%. What is Shelley's monthly payment and total finance charges?

Question 59

Calculate APR:

Question 60

Calculate (A) finance charge, (B) rebate, and (C) payoff.