Wise Practice Test Exam Questions With
100% Correct Answers 2024/2025
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
A. have at least a high school diploma.
B. have one-quarter of the cost of the home for a down-payment.
C. fulfill income guidelines.
D. provide two individuals to co-sign the loan.
Correct Answer C
Reason The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are
riskier than regular bank loans because FHA loans are made to individuals who usually would not
qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income
and a weaker credit score). The objective of this federal agency is to encourage home ownership
while helping to protect the lenders at the same time
A person has three credit cards with very large outstanding balances and is unable to make payments
on any of them. Which action should the person take?
A. Notify a credit reporting agency in order to avoid a late fee.
B. File for bankruptcy in order to maintain ones current credit score.
C. Notify the credit card companies in order to negotiate a new payment plan.
D. Contact the Internal Revenue Service in order to avoid paying income tax this year.
Correct Answer C
Reason When experiencing financial difficulties, the first action to take is to notify creditors, in this
case the three credit card companies. Quite often the company will assist in negotiating new terms.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
A. a collateralized loan.
B. a custodial payment.
C. an unsecured loan.
D. a sales agreement
Correct Answer A
Reason Since pawnshops make loans based on determining the value of collateral (a tangible object
such as jewelry, cameras, musical instruments) they receive, the loan is considered a collateralized
loan.
Which of the following is considered to be open-end credit?
A. A mortgage.
B. A car loan.
C. Department store charge cards.
D. Installment loans.
Correct Answer C
Reason Open-end credit is a revolving line of credit that is offered by banks and other lenders to
consumers. There is a limit set on the line of credit and the funds, products or services are accessed
using a credit or debit card, check, store charge card or cash advance. Consumers pay interest on the
outstanding balance. A car loan is made for a specified amount and a specific length of time and is
therefore considered closed-end credit. A mortgage loan is also considered a form of closed-end
credit since the house serves as collateral for the loan which is made at a specified interest rate for a
specified time period.
100% Correct Answers 2024/2025
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
A. have at least a high school diploma.
B. have one-quarter of the cost of the home for a down-payment.
C. fulfill income guidelines.
D. provide two individuals to co-sign the loan.
Correct Answer C
Reason The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are
riskier than regular bank loans because FHA loans are made to individuals who usually would not
qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income
and a weaker credit score). The objective of this federal agency is to encourage home ownership
while helping to protect the lenders at the same time
A person has three credit cards with very large outstanding balances and is unable to make payments
on any of them. Which action should the person take?
A. Notify a credit reporting agency in order to avoid a late fee.
B. File for bankruptcy in order to maintain ones current credit score.
C. Notify the credit card companies in order to negotiate a new payment plan.
D. Contact the Internal Revenue Service in order to avoid paying income tax this year.
Correct Answer C
Reason When experiencing financial difficulties, the first action to take is to notify creditors, in this
case the three credit card companies. Quite often the company will assist in negotiating new terms.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
A. a collateralized loan.
B. a custodial payment.
C. an unsecured loan.
D. a sales agreement
Correct Answer A
Reason Since pawnshops make loans based on determining the value of collateral (a tangible object
such as jewelry, cameras, musical instruments) they receive, the loan is considered a collateralized
loan.
Which of the following is considered to be open-end credit?
A. A mortgage.
B. A car loan.
C. Department store charge cards.
D. Installment loans.
Correct Answer C
Reason Open-end credit is a revolving line of credit that is offered by banks and other lenders to
consumers. There is a limit set on the line of credit and the funds, products or services are accessed
using a credit or debit card, check, store charge card or cash advance. Consumers pay interest on the
outstanding balance. A car loan is made for a specified amount and a specific length of time and is
therefore considered closed-end credit. A mortgage loan is also considered a form of closed-end
credit since the house serves as collateral for the loan which is made at a specified interest rate for a
specified time period.
