Week Three:

1. Which of the following is NOT a valid reason for borrowing?
a. Purchasing a new dishwasher
b. Paying for everyday living expenses
c. Buying a car to start a new job
d. Paying for a medical emergency

2. Which of the following is NOT correct?
a. Using credit is appropriate to pay for medical emergencies.
b. Using credit can increase the amount of money that will be available to spend in the future.
c. Using credit sometimes occurs automatically, such as for water or electricity usage.
d. Using credit allows consumers to enjoy goods and services now and pay later.

3. Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
a. A credit card
b. Closed-end credit
c. A debit card
d. A gift card

4. If Vince charged $200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?
a. $18.00
b. $182.00
c. $200.00
d. $236.00

5. Sam is comparing the costs of two loans. One is due in one year and the other is due in four years. Both have the same stated rate of interest. Which of the following is true?
a. The principal paid for the one-year loan will be lower than the principal paid for the four-year loan.
b. The principal paid for the one-year loan will be higher than the principal paid for the four-year loan
c. The interest paid for the one-year loan will be lower than the interest paid for the four-year loan.
d. The interest paid for the one-year loan will be higher than the interest paid for the four-year loan

6. Tanya received a $1,000 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 9% loan. What is her total interest?
a. $9
b. $45
c. $90
d. $1,009

7. Before taking out a loan, you should ask yourself whether you can meet all your essential expenses and still afford the monthly loan payments. This can be determined by
a. Adding up basic monthly expenses then subtracting this total from gross pay
b. Asking what you plan to give up to make the monthly loan payment
c. Multiplying your take-home pay by 50% and subtracting your current loan payments
d. Adding up basic monthly expenses, subtracting this total from take-home pay and, if needed, figuring out what to give up to make the payment.

8. The dealerís cost is also known as
a. Invoice price
b. Sticker price
c. Set price
d. Capitalized cost

9. Which of the following is a disadvantage of renting?
a. Renters have fewer responsibilities than home owners.
b. Tenants cannot take tax deductions for mortgage interest and property tax.
c. Renters usually do not have to be concerned with maintenance and repairs.
d. Taking possession of a rental unit is less expensive than buying a home.

10. Donald wanted to buy a house in the country, so he sought advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he had some information incorrect. Which of the following is incorrect?
a. An advantage is that Donald can deduct mortgage interest and real estate taxes.
b. A disadvantage is that Donald is responsible for maintenance and costs of repairs and home improvements.
c. An advantage is that the down payment required is less than the security deposit for a rental.
d. A disadvantaged is that real estate taxes are a major expense for home owners.