AnswersOCPS -2102371-Personal Finance and Money ManagementUnit Test

Credit and Loans Answers

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1
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Which describes the difference between secured and unsecured credit?

A
Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.
B
Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.
C
Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.
D
Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.
2
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Which describes an example of using unsecured credit?

A
Someone buys new gutters for a home with a credit card.
B
Someone buys a new vehicle with a loan from a car dealer.
C
Someone buys a new home with a mortgage from a bank.
D
Someone buys a new boat with a loan from a boat dealer.
3

good credita bank accounttax returns

A
good credit
B
a bank account
C
tax returns
4

A credit score is based in part on

A
employment and race.
B
income and location.
C
employment and trust.
D
payment history and total debt.
5

A way to build good credit is

A
using only secured loans.
B
taking out many lines of credit.
C
paying bills when they are due.
D
using only credit cards.
6

The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
a personal loan.
C
an auto loan.
D
a mortgage.
7

The chart shows a range of credit scores.

Question illustration
A
find it easy to get a loan.
B
find it hard to get a loan.
C
get a loan with low payments.
D
get a loan with low interest.
8

Which statement is true of both mortgages and auto loans?

A
They are riskier than student loans for lenders.
B
They do not require a minimum payment.
C
They are secured loans and generally require a down payment.
D
They have higher interest rates than credit cards.
9

Read the scenario.Jay and Laura have been dreaming of purchasing their first home together. They've been diligently saving and have managed to accumulate a significant sum for a down payment.How does their decision to make a larger down payment benefit their financial situation as they purchase a home?

A
It increases the interest rate on the loan.
B
It decreases their credit score.
C
It increases the home’s value.
D
It decreases their monthly payment.
10

What best determines whether a borrower’s interest rate on an adjustable rate loan goes up or down?

A
a fixed interest rate
B
a bank's finances
C
a market's condition
D
a person's finances
11

Which statement is true of both mortgages and auto loans?

A
They are riskier than student loans for lenders.
B
They do not require a minimum payment.
C
They are secured loans and generally require a down payment.
D
They have higher interest rates than credit cards.
12

In determining whether to issue a loan, banks are not allowed to ask about an applicant’s

A
employment history.
B
date of birth.
C
country of origin.
D
income tax returns.
13

Read the scenario.Casey has been saving for a new car and is ready to make a purchase. Having a substantial amount to put down as a down payment, Casey approaches the car dealership. The salesperson and the loan officer view Casey's willingness to make a high down payment positively.Why would Casey be considered a lower risk by the lender for planning to make a high down payment?

A
It shows that Casey prefers a high-interest rate.
B
It shows that Casey is committed to paying off the loan.
C
It shows that Casey may not need a loan at all.
D
It shows that Casey might refinance the loan soon.
14

A way to build good credit is

A
using only secured loans.
B
taking out many lines of credit.
C
paying bills when they are due.
D
using only credit cards.
15

What best determines whether a borrower’s interest rate on an adjustable rate loan goes up or down?

A
a fixed interest rate
B
a bank's finances
C
a market's condition
D
a person's finances
16

Read the scenario.Jay and Laura have been dreaming of purchasing their first home together. They've been diligently saving and have managed to accumulate a significant sum for a down payment.How does their decision to make a larger down payment benefit their financial situation as they purchase a home?

A
It increases the interest rate on the loan.
B
It decreases their credit score.
C
It increases the home’s value.
D
It decreases their monthly payment.
17

A credit score is based in part on

A
employment and race.
B
income and location.
C
employment and trust.
D
payment history and total debt.
18

What is a benefit of obtaining a personal loan?

A
getting money with special repayment terms
B
getting money with favorable interest rates
C
getting small amounts of money to use immediately
D
getting large amounts of money to use immediately
19

The type of credit people are most likely to use for small purchases during their lifetime is

A
a credit card.
B
a personal loan.
C
an auto loan.
D
a mortgage.
20

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

A
$10.00
B
$21.00
C
$33.10
D
$46.41

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