UGBA 135 FINAL EXAM QUESTIONS AND
ANSWERS
◉ What is considered "bad debt"? Answer: - Borrowing money to
support a lifestyle of living beyond one's means
◉ What is the definition of a Modern Day Millionaire? Answer: -
Financially independent, no government assistance, living the life
they want to lead
◉ What is a credit card? Answer: - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
◉ What is a debit card? Answer: - A secured line of credit
- the bank is taking no risk in issuing one of these
◉ What is a charge card? Answer: - Issued by a retailer allowing you
to charge purchases made only with their store
- store credit usually carries high rates or interest as high as 20 -
30% on unpaid balances
,◉ What is prepaid card? Answer: - Offered by banks and non- banks
- not linked to one's bank account
- entails high fees and interest
◉ What is a payday loan? Answer: - A high interest short term cash
loan that is intended to be repaid by future paychecks
◉ What is installment debt? Answer: - Money that is borrowed to
purchase large items such as a car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals
until the loan is paid back in full
◉ What is a deferred interest plan Answer: A plan that enables a
consumer to purchase big - ticket items paying no interest or a low
"teaser" rate of interest over a promotional period.
◉ What are Gift Cards? Answer: - Stored value cards, usually for use
at a specific retailer or merchant
◉ What is a cashier's check? Answer: - A check purchased by you
from a bank, payable to a third party designated by you.
◉ What is a certified Check? Answer: - A personal check the bank
guarantees as being supported by funds in your account
,◉ What is credit? Answer: The amount of money a lender is willing
to lend subject to repayment terms and conditions such as interest,
fees and penalties
◉ What is Debt? Answer: - The state of owing something such as
money
◉ What is a Debtor (or borrower)? Answer: - A person or entity with
debt which owes or has the obligations to repay the debt
◉ What is principle? Answer: - The amount of money that is
borrowed or loaned
◉ What is interest Answer: THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received
by the lender for providing the principal - expressed as APR (annual
percentage rate)
◉ What is the Fixed Rate of Interest? Answer: - A loan with an
interest rate that will remain at a predetermined or "fixed" rate for
the life or term of the loan - the rate does not fluctuate.
, ◉ What is an adjustable Rate of interest? Answer: - A loan where the
rate of interest is not fixed but may change at various specified times
- most commonly foun din homes where the interest rate is
established for a few years and is then changed to a new rate for the
balance of the loan
◉ What is the "go - to" rate? Answer: - The interest rate you are
charged on upaid credit card balances, in addition to the variable
rate to determine the total rate of interest on your account
◉ What is revolving credit? Answer: - credit or funds made available
to you for use at any time - subject to the terms of repayment - you
can use your credit line over and over again up to its limit - it
revolves
◉ What is the default rate? Answer: - an accelerated rate of interest,
typically 28 - 35% charged on your credit balance as a penalty -
didn't make minimum payment on due date - or payment isn't
honored by the bank such as a bounced check
◉ What is the balance transfer fee? Answer: - The fee which might
be charge by a new lender if you transfer the balance from your
credit card provider t another
- typically the fee is 2 - 5 %
ANSWERS
◉ What is considered "bad debt"? Answer: - Borrowing money to
support a lifestyle of living beyond one's means
◉ What is the definition of a Modern Day Millionaire? Answer: -
Financially independent, no government assistance, living the life
they want to lead
◉ What is a credit card? Answer: - An unsecured line of credit
- based on good faith and credit history
- this is a risk for a bank
◉ What is a debit card? Answer: - A secured line of credit
- the bank is taking no risk in issuing one of these
◉ What is a charge card? Answer: - Issued by a retailer allowing you
to charge purchases made only with their store
- store credit usually carries high rates or interest as high as 20 -
30% on unpaid balances
,◉ What is prepaid card? Answer: - Offered by banks and non- banks
- not linked to one's bank account
- entails high fees and interest
◉ What is a payday loan? Answer: - A high interest short term cash
loan that is intended to be repaid by future paychecks
◉ What is installment debt? Answer: - Money that is borrowed to
purchase large items such as a car or furniture paid over time
- borrower purchases the item and pays for it at regular intervals
until the loan is paid back in full
◉ What is a deferred interest plan Answer: A plan that enables a
consumer to purchase big - ticket items paying no interest or a low
"teaser" rate of interest over a promotional period.
◉ What are Gift Cards? Answer: - Stored value cards, usually for use
at a specific retailer or merchant
◉ What is a cashier's check? Answer: - A check purchased by you
from a bank, payable to a third party designated by you.
◉ What is a certified Check? Answer: - A personal check the bank
guarantees as being supported by funds in your account
,◉ What is credit? Answer: The amount of money a lender is willing
to lend subject to repayment terms and conditions such as interest,
fees and penalties
◉ What is Debt? Answer: - The state of owing something such as
money
◉ What is a Debtor (or borrower)? Answer: - A person or entity with
debt which owes or has the obligations to repay the debt
◉ What is principle? Answer: - The amount of money that is
borrowed or loaned
◉ What is interest Answer: THE COST OF MONEY
- paid by the borrower to obtain the used of the principal or received
by the lender for providing the principal - expressed as APR (annual
percentage rate)
◉ What is the Fixed Rate of Interest? Answer: - A loan with an
interest rate that will remain at a predetermined or "fixed" rate for
the life or term of the loan - the rate does not fluctuate.
, ◉ What is an adjustable Rate of interest? Answer: - A loan where the
rate of interest is not fixed but may change at various specified times
- most commonly foun din homes where the interest rate is
established for a few years and is then changed to a new rate for the
balance of the loan
◉ What is the "go - to" rate? Answer: - The interest rate you are
charged on upaid credit card balances, in addition to the variable
rate to determine the total rate of interest on your account
◉ What is revolving credit? Answer: - credit or funds made available
to you for use at any time - subject to the terms of repayment - you
can use your credit line over and over again up to its limit - it
revolves
◉ What is the default rate? Answer: - an accelerated rate of interest,
typically 28 - 35% charged on your credit balance as a penalty -
didn't make minimum payment on due date - or payment isn't
honored by the bank such as a bounced check
◉ What is the balance transfer fee? Answer: - The fee which might
be charge by a new lender if you transfer the balance from your
credit card provider t another
- typically the fee is 2 - 5 %
