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Exam 7: Student and Consumer Loans: the Role of Planned Borrowing

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Question 41

Multiple Choice

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You are headed to the mountains for some climbing this summer and you need some gear.The local mountaineering shop is offering 6% financing on all purchases before the end of the month.Your savings account is currently paying 5%,and you are in a marginal tax bracket of 28%.Which of the following is true?

A) Borrow from the mountain shop - it is cheaper.
B) Take the money out of savings - it is cheaper.
C) It does not matter where you get the money;it will cost the same.
D) You should seek competent financial help.
E) None of the above are true.

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Question 42

Multiple Choice

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What is the name of the interest rate banks charge to their most creditworthy customers?

A) Main rate
B) Blue chip rate
C) Prime rate
D) Premier rate
E) None of the above

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Question 43

True/False

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Consumer loans are less formal than credit cards and/or other open credit.

According to the Keown book,how do you finance your college education without mortgaging your future?

Frank ran up a large credit card bill as an undergraduate student,he also took out as much in student loans as possible.He is now unable to pay his credit card debt and his student loan debt.However,he has decided to declare bankruptcy to eliminate his debt.Frank will be able to eliminate his federally subsidized student loan debt by declaring bankruptcy.

Which of these are possible options for most people who cannot pay their bills?

The finance charges for a loan may include

Explain why add-on installment loans are more expensive than simple interest loans.

Many lenders use the 28/36 rule in evaluating mortgage applications.If your mortgage payment itself is 28% of your gross income,that means that the remainder of your monthly debt must be ________% or less.

Describe in detail the characteristics of the direct subsidized and unsubsidized student loans from the Federal government.

Ronald is borrowing $20,000 using the discount method.His bank is offering him an annual percentage rate of 8.5% and he is taking out the loan for 24 months.How large of a check will Ronald receive from this loan when he leaves the bank? How much will he repay?

If you own a home with a market value of $175,000 and you have an outstanding balance on your mortgage of $60,000,your home equity is

A rule to determine what proportion of each loan payment is principal and interest is

What strategy should you use to obtain the lowest possible APR on a loan?

Which statement is true regarding direct unsubsidized loans?

A simple interest installment loan calculates interest on the unpaid balance.An add-on

What is the type of loan where the entire interest charge is subtracted from the loan principal before you receive the money,and at maturity you repay the entire principal?

What is the distinguishing feature of an automobile loan?

________ is when a borrower is allowed to temporarily stop making student loan payments for a qualified reason such as an illness,financial hardship,or serving in a medical or dental internship or residency.

Which of the following is the correct formula to calculate the after-tax cost of a home equity loan?