PERSONAL LOANS TEST AND/OR QUIZ BANK
1. Personal loans are normally used to finance
A. day to day expenditures.
B. large purchases.
C. clothing purchases.
D. drug prescriptions.
2. To determine your financial condition as far as ownership of assets and debts owed on those assets, a lender would ask you for a
A. personal cash flow statement.
B. personal budget.
C. personal balance sheet.
D. personal tax statement.
3. Personal loans are normally amortized. This refers to the fact that
A. collateral must be pledged.
B. the interest rate is applied to the original principal owed.
C. the loan has been cosigned
D. the loan is being repaid by making a series of equal payments with each payment including a portion of the principal as well as interest owed.
4. All other factors constant, which of the following is true?
A The interest rate on a secured loan tends to be lower than the interest rate on an unsecured loan.
B. The interest rate on a secured loan and an unsecured loan tends to be the same.
C. There is no definite relationship between the interest rate on a secured and an unsecured loan.
D. The interest rate on a secured loan tends to be higher than the interest rate on an unsecured loan.
5. If your parents cosign your loan and you later default on the loan,
A. the lender will simply write the loan off as a loss.
B. your parents will have to pay whatever balance is owed on the loan.
C. the lender can only look to you for payment.
D. your parents may pay the loan balance owed, but they have no legal obligation to do so.
6. If you were shopping for the best loan rate, you should compare
A. annual percentage rates (APRs)
B. add-on interest rates.
C. holding period returns (HPRs).
D. annual percentage yields (APYs).
7. All other factors constant, which of the following is a correct statement concerning loans?
A. The longer the maturity, the less paid in interest.
B. The larger the amount of the loan, the lower the monthly payment.
C. The higher the interest rate, the larger the monthly payment.
D. The shorter the maturity, the lower the monthly payment.
8. You borrow $2,000 for one year and are charged a simple interest rate of 12 percent. Your
monthly payment is $177.70. How much of your first monthly payment would be applied to
pay down the principal?
A. $20.
B. $157.70.
C. $177.70.
D. $1,842.30.
9. As you make payments on a loan, the amount of each payment applied to pay off the principal
A. increases.
B. decreases.
C. remains constant.
D. shows no discernible trend.
10. The most common source of personal loans is
A. family members.
B. employers.
C. friends.
D. financial institutions.
11. The PowerPoint presentation on debt indicated that references to debt in the Bible tend to
A. be negative.
B. be positive as long as the borrower makes the payments.
C. be neither positive nor negative.
D. applaud the wise use of debt.
12. Based on the PowerPoint presentation on debt, borrowing to buy a home would best
illustrate which of the following reasons for borrowing?
A. For large purchases
B. For financial emergencies
C. For convenience
D. For investment.
13. If you buy a home and pay it off over a long period of time, you may pay more interest than
loan principal. The illustrates, according to the PowerPoint presentation on debt, that
A. renting is better than buying.
B. you should have a guaranteed way to repay the loan.
C. the compounding effect works against you.
D. buying credit life insurance is essential.
14. How can a Christian make sure that his loans will be repaid, according to the PowerPoint
presentation on debt?
A. Put up collateral every time he borrows.
B. Buy adequate life and disability insurance.
C. Order his wife to make the payments.
D. Be a good gambler.
15. Suppose I need $5,000 to buy a used car for transportation to and from work. I borrow the
$5,000 from a local bank, rather than taking the time to prayerfully consider and explore
other alternatives. Suppose if I had not been so quick to borrow the $5,000, God would have
opened up an opportunity for me to earn the $5,000. According to the PowerPoint
presentation on debt, this situation illustrates which of the spiritual dangers of debt?
A. Debt creates bondage to this world.
B. Debt may deny God an opportunity to work.
C. Debt may result in your "getting in over your head."
D. Using debt presumes upon the future.
16. According to the PowerPoint presentation on debt, borrowing should only fund
A. greeds.
B. impulse purchases.
C. true needs.
D. nondurable goods (food, clothing, etc.).
17. According to the PowerPoint presentation on debt, borrowing is inappropriate if
A. making the payments will prevent the giving of tithes and offerings.
B. the money is used to buy necessities.
C. family members are involved.
D. the interest rate is high.
18. Suppose I borrow money from you. According to the PowerPoint presentation on debt, the
Bible refers to me as your
A. peer.
B. servant.
C. friend.
D. creditor.
19. According to the tutorial, "Personal Loans," the rate that the Truth in Lending requires
lenders to disclose in bold print on a loan contract is the
A. APY.
B. IRR.
C. add-on rate.
D. APR.
20. According to the tutorial, "Personal Loans," in computing interest on a loan, the APR is
applied to the
A. original balance owed.
B. declining balance owed.
C. ending balance owed.
D. average balance owed.
21. You borrow $2,000 at 10 percent and agree to pay it back in monthly installments over a one
year period. At the end of six months, you pay off the loan. The tutorial, "Personal Loans,"
indicates that the interest you will escape (avoid) having to pay will be
A. $100.
B. more than $100.
C. less than $100.
D. $200.
22. You borrow $1,000 and agree to pay it and the interest involved in twelve monthly
payments. According to the discussion on the Rule of 78s in the tutorial, "Personal Loans,"
how much interest will be allocated to the third month?
A. 12/78s of the total interest.
B. 11/78s of the total interest.
C. 10/78s of the total interest.
D. 3/78s of the total interest.
23. The tutorial, "Personal Loans," suggested a procedure to follow when considering borrowing.
The procedure involved testing your budget by putting the amount of the projected monthly payment
on the debt in savings for how many months?
A. Twelve.
B. Nine.
C. Six.
D. Three.