UGBA 135 FINAL EXAM QUESTIONS
AND ANSWERS. VERIFIED 2025/2026.
What is "good debt"? - ANS Taking out loans in order to pay off a car, a mortgage or an
education or starting a business
What is considered "bad debt"? - ANS - Borrowing money to support a lifestyle of living
beyond one's means
What is the definition of a Modern Day Millionaire? - ANS - Financially independent, no
government assistance, living the life they want to lead
What is a credit card? - ANS - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
What is a debit card? - ANS - A secured line of credit
- the bank is taking no risk in issuing one of these
What is a charge card? - ANS - Issued by a retailer allowing you to charge purchases made
only with their store
- store credit usually carries high rates or interest as high as 20 - 30% on unpaid balances
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What is prepaid card? - ANS - Offered by banks and non- banks - not linked to one's bank
account
- entails high fees and interest
What is a payday loan? - ANS - A high interest short term cash loan that is intended to be
repaid by future paychecks
What is installment debt? - ANS - Money that is borrowed to purchase large items such as a
car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals until the loan is paid back in
full
What is a deferred interest plan - ANS A plan that enables a consumer to purchase big - ticket
items paying no interest or a low "teaser" rate of interest over a promotional period.
What are Gift Cards? - ANS - Stored value cards, usually for use at a specific retailer or
merchant
What is a cashier's check? - ANS - A check purchased by you from a bank, payable to a third
party designated by you.
What is a certified Check? - ANS - A personal check the bank guarantees as being supported
by funds in your account
What is credit? - ANS The amount of money a lender is willing to lend subject to repayment
terms and conditions such as interest, fees and penalties
What is Debt? - ANS - The state of owing something such as money
What is a Debtor (or borrower)? - ANS - A person or entity with debt which owes or has the
obligations to repay the debt
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is principle? - ANS - The amount of money that is borrowed or loaned
What is interest - ANS THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received by the lender for providing
the principal - expressed as APR (annual percentage rate)
What is the Fixed Rate of Interest? - ANS - A loan with an interest rate that will remain at a
predetermined or "fixed" rate for the life or term of the loan - the rate does not fluctuate.
What is an adjustable Rate of interest? - ANS - A loan where the rate of interest is not fixed
but may change at various specified times
- most commonly foun din homes where the interest rate is established for a few years and is
then changed to a new rate for the balance of the loan
What is the "go - to" rate? - ANS - The interest rate you are charged on upaid credit card
balances, in addition to the variable rate to determine the total rate of interest on your account
What is revolving credit? - ANS - credit or funds made available to you for use at any time -
subject to the terms of repayment - you can use your credit line over and over again up to its
limit - it revolves
What is the default rate? - ANS - an accelerated rate of interest, typically 28 - 35% charged on
your credit balance as a penalty - didn't make minimum payment on due date - or payment isn't
honored by the bank such as a bounced check
What is the balance transfer fee? - ANS - The fee which might be charge by a new lender if
you transfer the balance from your credit card provider t another
- typically the fee is 2 - 5 %
What is the grace period? - ANS - A period in the billing cycle during which no penalty is due
as long as payment is received on time by the lender
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND ANSWERS. VERIFIED 2025/2026.
What is "good debt"? - ANS Taking out loans in order to pay off a car, a mortgage or an
education or starting a business
What is considered "bad debt"? - ANS - Borrowing money to support a lifestyle of living
beyond one's means
What is the definition of a Modern Day Millionaire? - ANS - Financially independent, no
government assistance, living the life they want to lead
What is a credit card? - ANS - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
What is a debit card? - ANS - A secured line of credit
- the bank is taking no risk in issuing one of these
What is a charge card? - ANS - Issued by a retailer allowing you to charge purchases made
only with their store
- store credit usually carries high rates or interest as high as 20 - 30% on unpaid balances
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What is prepaid card? - ANS - Offered by banks and non- banks - not linked to one's bank
account
- entails high fees and interest
What is a payday loan? - ANS - A high interest short term cash loan that is intended to be
repaid by future paychecks
What is installment debt? - ANS - Money that is borrowed to purchase large items such as a
car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals until the loan is paid back in
full
What is a deferred interest plan - ANS A plan that enables a consumer to purchase big - ticket
items paying no interest or a low "teaser" rate of interest over a promotional period.
What are Gift Cards? - ANS - Stored value cards, usually for use at a specific retailer or
merchant
What is a cashier's check? - ANS - A check purchased by you from a bank, payable to a third
party designated by you.
What is a certified Check? - ANS - A personal check the bank guarantees as being supported
by funds in your account
What is credit? - ANS The amount of money a lender is willing to lend subject to repayment
terms and conditions such as interest, fees and penalties
What is Debt? - ANS - The state of owing something such as money
What is a Debtor (or borrower)? - ANS - A person or entity with debt which owes or has the
obligations to repay the debt
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is principle? - ANS - The amount of money that is borrowed or loaned
What is interest - ANS THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received by the lender for providing
the principal - expressed as APR (annual percentage rate)
What is the Fixed Rate of Interest? - ANS - A loan with an interest rate that will remain at a
predetermined or "fixed" rate for the life or term of the loan - the rate does not fluctuate.
What is an adjustable Rate of interest? - ANS - A loan where the rate of interest is not fixed
but may change at various specified times
- most commonly foun din homes where the interest rate is established for a few years and is
then changed to a new rate for the balance of the loan
What is the "go - to" rate? - ANS - The interest rate you are charged on upaid credit card
balances, in addition to the variable rate to determine the total rate of interest on your account
What is revolving credit? - ANS - credit or funds made available to you for use at any time -
subject to the terms of repayment - you can use your credit line over and over again up to its
limit - it revolves
What is the default rate? - ANS - an accelerated rate of interest, typically 28 - 35% charged on
your credit balance as a penalty - didn't make minimum payment on due date - or payment isn't
honored by the bank such as a bounced check
What is the balance transfer fee? - ANS - The fee which might be charge by a new lender if
you transfer the balance from your credit card provider t another
- typically the fee is 2 - 5 %
What is the grace period? - ANS - A period in the billing cycle during which no penalty is due
as long as payment is received on time by the lender
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
