Chapter 18-Responsibilities And Costs Of Credit

Question 0

Rate of interest is charged by banks to their best commercial (business) customers

Answer 0

Prime rate

Question 1

The total amount that is financed or borrowed, on which interest is computed

Answer 1

Principle

Question 2

The portion of purchase price refunded

Answer 2

Rebate

Question 3

The amount above what you owe, but below your maximum credit limit

Answer 3

Unused credit

Question 4

When computations to determine interest involve the formula I=P times R times T, this is….interest

Answer 4

Simple

Question 5

Money paid for the use of someone else’s money

Answer 5

Interest

Question 6

The simple interest equation is expressed as a fraction of a year

Answer 6

Time

Question 7

A deposit that is often made when purchasing a large or expensive item to ensure that you will continue to make payments

Answer 7

Down payment

Question 8

Legal process that allows part of your check to be withheld for payment of a debt

Answer 8

Garnishment

Question 9

The true annual rate of interest being charged

Answer 9

Annual percentage rate

Question 10

Always expressed as a percentage in the simple interest equation

Answer 10

Interest rate

Question 11

Method of computing finance charges first subtracts the monthly payment and then adds the finance charge to get the new balance

Answer 11

Adjusted balance

Question 12

Method of computing finance charges first computes the finance charge and add it to the balance, and then subtracts the payment to get the new balance

Answer 12

Previous balance

Question 13

Method of computing finance charges based on the average of credit balances from each day during the month

Answer 13

Average daily balance

Question 14

The cost of credit is determined by subtracting the cash price from the total price including all financial charges and other costs

Answer 14

True

Question 15

The rate of interest that banks offer to their very best individual (non commercial) customers is called prime rate

Answer 15

False

Question 16

The time of repayment of a loan is expressed in the fraction of a year; the denominator is 12 months or 360 days

Answer 16

True

Question 17

To determine simple interest, multiply the number of payments by the amount of each payment; then subtract from the principle

Answer 17

False

Question 18

The average daily balance method often results in a lower finance charge than does the previous balance

Answer 18

True

Question 19

It is your responsibility to your creditors to limit spending to amounts that can be repaid according to credit agreement

Answer 19

True

Question 20

Rebates often serve to increase the cost of credit

Answer 20

False

Question 21

The down payment is part of the retail installment contract

Answer 21

True

Question 22

Individuals pay…..than the rate of interest that banks offer to business accounts

Answer 22

More

Question 23

As your income increases, you…….increase your credit

Answer 23

Should not

Question 24

A good rule of thumb is that purchases under…..should not be charged but paid in cash

Answer 24

$25

Question 25

The method of payment on installment loans is usually

Answer 25

Monthly

Question 26

A trade on is……the purchase price of merchandise to determine the principle of a loan

Answer 26

Subtracted from

Question 27

The amount of credit above what you owe is called

Answer 27

Unused credit