Question 1

Someone with a poor credit rating might be offered a credit card with a 28 percent interest rate while someone with a high credit rating may be offered 21 percent.

Accepted Answer

The answer of Someone with a poor credit rating might...

Question 2

One of the greatest benefits of leasing a car is that you do not have the hassles of ownership.

Accepted Answer

The answer of One of the greatest benefits of leasing...

Question 3

The proceeds from a home equity loan must be used for home improvements.

Accepted Answer

The proceeds from a home equity loan can be used for any purpose, not just home improvements.

Question 4

Which of the following will have a negative effect on a credit history?
A)Taking out a car loan with a ten year maturity
B)Making as many purchases as possible with cash
C)Never exceeding your credit limit on your credit card
D)All these options would have a positive effect on credit history.

Accepted Answer

Making as many purchases as possible with cash means there is no credit being used or paid off, which can lead to a lack of credit history and potentially a lower credit score.

Question 5

Which of the following will not be included on your credit report?
A)Social insurance number
B)Your employment income
C)Unpaid accounts
D)Companies that have recently inquired about your credit report

Accepted Answer

Your employment income is not included on your credit report. Credit reports typically contain information about your credit accounts, payment history, and inquiries, but not your income.

Question 6

If you were charged the maximum legal rate of interest on a $1000 loan for one year,the interest cost would be $60.

Accepted Answer

The maximum legal rate of interest varies by state and country. It is not possible to determine the accuracy of the statement without knowing the specific interest rate and location.

Question 7

If Brian has a home worth $400 000 and a mortgage of $200 000,he should be able to get a HELOC for $160 000 at a better interest rate than if he got an unsecured line of credit.

Accepted Answer

The answer of If Brian has a home worth $400...

Question 8

The greatest benefit of student loans is that the interest is tax deductible.

Accepted Answer

The greatest benefit of student loans is not that the interest is tax deductible, but rather that they provide financial assistance for students to help cover the cost of higher education. While student loan interest may be tax deductible in certain situations, this is not the primary benefit of taking out a student loan.

Question 9

The worst outcome from identity theft is that you could be responsible for charges someone made fraudulently on your credit card.

Accepted Answer

Identity theft can lead to more severe consequences than fraudulent charges on your credit card, such as damage to your credit score, legal issues, or even criminal charges if the thief commits crimes under your identity.

Question 10

Credit card use can be good for your financial plan if you have budgeted to pay the entire balance when the statement is due.

Accepted Answer

Using a credit card responsibly and paying off the balance in full each month can help build credit history and earn rewards. However, carrying a balance and paying interest can be detrimental to a financial plan.

Question 11

In considering the True cost of a personal loan,if you used collateral to reduce the interest charge,then the appraisal fee charged to evaluate the assets should not be considered part of the cost of borrowing.

Accepted Answer

The appraisal fee charged to evaluate the assets used as collateral is a direct cost of obtaining the loan, and should therefore be considered as part of the borrowing costs even though it is a one-time expense.

Question 12

Which of the following is an advantage of using credit?
A)It increases the need to cover cash flow shortages.
B)It increases the number of cheques written.
C)It does not affect your cash flow statement.
D)It reduces the need to carry cash.

Accepted Answer

Using credit reduces the need to carry cash.

Question 13

Which of the following is not an element of a credit report?
A)Employer
B)Length of relationship with creditors
C)Marital status
D)Your previous address

Accepted Answer

Marital status is not an element of a credit report. The other options are usually included in credit reports as they provide information on the borrower's financial behavior and credit history.

Question 14

A 20 percent annual interest rate on a $10 000 loan amortized over five-years would result in interest charges of $10 000.

Accepted Answer

This statement is false. A 20% annual interest rate on a $10,000 loan amortized over five years would result in interest charges of approximately $6,200 - $6,500 depending on the specific terms of the loan.

Question 15

Which of the following is a typical example of an instalment loan?
A)A credit card
B)A student loan
C)A line of credit
D)A demand loan

Accepted Answer

A student loan is a typical example of an installment loan because it is a loan that is repaid in regular installments (usually monthly) over a set period of time. Other examples of installment loans include car loans and mortgages, where borrowers make regular payments towards the principal and interest until the loan is fully paid off. A credit card is not an example of an installment loan because the borrower can choose to pay off the balance in full each month or make minimum payments, and interest is charged on the outstanding balance. A line of credit and a demand loan are both types of revolving credit, not installment loans.

Question 16

The risk in co-signing on a loan for a friend is not significant,as you are not the primary borrower.

Accepted Answer

Co-signing on a loan means you are equally responsible for the repayment of the loan along with the primary borrower. If the primary borrower defaults on the loan, the co-signer may be required to pay back the full amount, along with interest and any penalties. Therefore, there is a significant risk involved in co-signing on a loan for a friend or anyone else.

Question 17

Using the previous balance method,if you paid your credit card off five days late and your balance was $5000,with interest 20% calculated daily,you would owe $15.16 in interest.

Accepted Answer

Using the previous balance method, interest is calculated based on the balance at the beginning of the billing cycle, not on daily balances or late payments. The calculation provided seems to reflect a daily interest calculation rather than the previous balance method.

Question 18

If not objected to by the creditors,a consumer proposal could enable someone with $50 000 in consumer debt to pay off $30 000 of it and have it removed from their credit bureau report.

Accepted Answer

This is true. A consumer proposal is a legally binding agreement between a person and their creditors to settle their debts for less than what is owed. If it is accepted by the majority of the creditors, it allows the person to pay off a portion of their debt and have the remaining amount erased from their credit bureau report.

Question 19

If a buyer has limited capital,leasing a car will usually require lower monthly payments than a car loan.

Accepted Answer

Leasing a car typically requires lower monthly payments compared to a car loan, as the buyer is only paying for the depreciation and not the full value of the vehicle. This can make it a more affordable option for those with limited capital.

Question 20

The item that receives the most weight in the BEACON credit scoring system is
A)the amount of credit used each month.
B)credit payment history.
C)credit use.
D)the total amount of credit.

Accepted Answer

Credit payment history has the most weight in the BEACON credit scoring system, accounting for 35% of the total score.

Quiz 6: Managing Your Financial Resources - Assessing, Managing, and Securing Your Credit