PFIN EXAM QUESTIONS WITH 100%
CORRECT ANSWERS
The lender uses a credit application to determine whether the borrower has the ____ to
handle the debt. - Answer-character and capacity.
A ____ is an agency that provides credit information about individual borrowers to
lenders. - Answer-credit bureau
If the information on your credit report is in dispute, you are entitled to - Answer-supply
your own explanation about the dispute.
Anna uses her credit card regularly, but she pays the total balance monthly. Anna
should look for a credit account with - Answer-no annual fee.
long grace period.
a and c.
Joe and Jane have a tendency to build up large balances on their credit cards. Which of
the following would be least important for them? - Answer-long grace period.
When canceling a credit card, you should cut up the card and ____ that you are
canceling your account. - Answer-inform the issuer in writing
Consumer loans are often used by individuals today to purchase nondurable items. -
Answer-False
Consumer loans, like open account credit, result from a rather informal process -
Answer-False
The cash value of a whole life insurance policy can be used as a source of loan
collateral. - Answer-True
Single payment loans are used mostly for short-term financing. - Answer-True
Both single-payment and installment loans can have variable interest rates. - Answer-
True
Commercial banks are generally more selective in granting loans than finance
companies. - Answer-True
, When comparing two installment loans with the same principal and APR, the loan with
the longer maturity will have the lower monthly payment and the higher total costs. -
Answer-True
A chattel mortgage is a legal claim that gives lenders the right to liquidate specific
personal property to satisfy their claims in the event of default. - Answer-True
An installment purchase agreement typically includes a sales contract, a security
agreement, a note, and an insurance agreement. - Answer-True
The most accurate method currently available for calculating the annual percentage rate
(APR) on an add-on loan is the Rule of 78. - Answer-True
Long-term financial goals often depend on borrowing funds. The type of loan that does
not fulfill the long-term goal achievement is ____ loans. - Answer-single payment
The most popular use of consumer loans is to - Answer-purchase a car.
Commercial banks generally charge lower interest rates than other lending institutions
because - Answer-they usually take only the best credit risks.
Which of the following are recommended if you loan money to a friend or relative? -
Answer-Do it in a business-like fashion.
Charge interest if the loan is not to be quickly repaid.
Be sure both parties understand it is a loan, not a gift.
Lend only money you can afford to give away. All of the above
Besides the finance charge, you should also consider ____ when you shop for a
consumer loan. - Answer-loan maturity
total cost of the loan
collateral
repayment penalties
all of the above
The annual percentage rate (APR) on a single payment loan for $1,000 at a simple
interest rate of 12% is - Answer-12%
Purchasing credit life or disability insurance protection is usually - Answer-very costly.
Installment loans using the simple interest method - Answer-have interest charged only
on the monthly loan balance.
Standard of living is defined as the necessities, comforts, and luxuries desire. - Answer-
True
CORRECT ANSWERS
The lender uses a credit application to determine whether the borrower has the ____ to
handle the debt. - Answer-character and capacity.
A ____ is an agency that provides credit information about individual borrowers to
lenders. - Answer-credit bureau
If the information on your credit report is in dispute, you are entitled to - Answer-supply
your own explanation about the dispute.
Anna uses her credit card regularly, but she pays the total balance monthly. Anna
should look for a credit account with - Answer-no annual fee.
long grace period.
a and c.
Joe and Jane have a tendency to build up large balances on their credit cards. Which of
the following would be least important for them? - Answer-long grace period.
When canceling a credit card, you should cut up the card and ____ that you are
canceling your account. - Answer-inform the issuer in writing
Consumer loans are often used by individuals today to purchase nondurable items. -
Answer-False
Consumer loans, like open account credit, result from a rather informal process -
Answer-False
The cash value of a whole life insurance policy can be used as a source of loan
collateral. - Answer-True
Single payment loans are used mostly for short-term financing. - Answer-True
Both single-payment and installment loans can have variable interest rates. - Answer-
True
Commercial banks are generally more selective in granting loans than finance
companies. - Answer-True
, When comparing two installment loans with the same principal and APR, the loan with
the longer maturity will have the lower monthly payment and the higher total costs. -
Answer-True
A chattel mortgage is a legal claim that gives lenders the right to liquidate specific
personal property to satisfy their claims in the event of default. - Answer-True
An installment purchase agreement typically includes a sales contract, a security
agreement, a note, and an insurance agreement. - Answer-True
The most accurate method currently available for calculating the annual percentage rate
(APR) on an add-on loan is the Rule of 78. - Answer-True
Long-term financial goals often depend on borrowing funds. The type of loan that does
not fulfill the long-term goal achievement is ____ loans. - Answer-single payment
The most popular use of consumer loans is to - Answer-purchase a car.
Commercial banks generally charge lower interest rates than other lending institutions
because - Answer-they usually take only the best credit risks.
Which of the following are recommended if you loan money to a friend or relative? -
Answer-Do it in a business-like fashion.
Charge interest if the loan is not to be quickly repaid.
Be sure both parties understand it is a loan, not a gift.
Lend only money you can afford to give away. All of the above
Besides the finance charge, you should also consider ____ when you shop for a
consumer loan. - Answer-loan maturity
total cost of the loan
collateral
repayment penalties
all of the above
The annual percentage rate (APR) on a single payment loan for $1,000 at a simple
interest rate of 12% is - Answer-12%
Purchasing credit life or disability insurance protection is usually - Answer-very costly.
Installment loans using the simple interest method - Answer-have interest charged only
on the monthly loan balance.
Standard of living is defined as the necessities, comforts, and luxuries desire. - Answer-
True
