Question

pre - test page 6 of 9 31. what does a credit bureau do? a. extends credit to qualified buyers b. provides advice on how to use credit c. tracks the bill - paying habits of consumers d. sends warnings to people in credit trouble 32. if a borrower chooses a loan that allows a longer payment schedule, the monthly payment is: a. lower and the interest paid is higher. b. higher and the interest paid is higher. c. lower and the interest paid is lower. d. higher and the interest paid is lower. 33. what is the relationship between the interest rate charged an individual and a person’s risk of nonpayment of a loan? a. a relationship exists, but it can be either direct or indirect b. the lower the risk of nonpayment, the higher the interest rate c. the higher the risk of nonpayment, the higher the interest rate d. no relationship exists between interest rate and risk of nonpayment 34. the best indicator of the cost of a loan is the: a. amount of down payment. b. annual percentage rate. c. number of payments. d. monthly payment. 35. a thief takes your credit card. you report the card missing, but the thief has already run up $2,000 in bills. how much of the $2,000 are you responsible for? a. your liability is limited to $50. b. your liability depends on whether the unauthorized card user is caught. c. you are not liable for any of the $2,000 because you reported the card stolen. d. you are liable for the entire $2,000 because the card was issued in your name. 36. a company calls you and offers an investment opportunity with very high returns. all you have to do is recruit some of your friends who will also invest and soon your checks will start rolling in. this is a description of which type of investment fraud? a. identity theft b. a loan scam c. credit repair scam d. a pyramid scheme

Explanation:

1. Credit bureaus track consumer bill - paying habits.
2. Longer payment schedules mean lower monthly payments but higher total interest.
3. Lenders charge higher interest to those with higher non - payment risk.
4. The annual percentage rate best indicates loan cost.
5. By law, a cardholder's liability for unauthorized charges after reporting loss is usually limited to $50.
6. Recruiting friends for an investment with high returns based on recruitment is a pyramid scheme.

Answer:

1. c. tracks the bill - paying habits of consumers
2. a. lower and the interest paid is higher.
3. c. the higher the risk of nonpayment, the higher the interest rate
4. b. annual percentage rate.
5. a. Your liability is limited to $50.
6. d. a pyramid scheme