Finance 1200 Spring 2016 Chapter 6
_____1. Credit encourages overspending and ties up future income.
With open-end credit, the borrower pays back a onetime loan in a specified
period of time and with a specified number of payments.
With closed-end credit, the borrower is permitted to take loans on a continuous
basis and is billed for partial payments periodically .
Two general rules of thumb for measuring credit capacity are the debt
payments-to-income ratio and debt-to-equity ratio.
Creditors determine credit worthiness on the basis of character, capacity,
capital, collateral, and conditions.
An example of closed-end credit is
a. incidental credit.
b. revolving check credit.
c. credit cards.
d. installment sales credit.
An example of open-end credit is
a. installment sales credit.
b. credit cards.
c. mortgage loans.
d. automobile loans.
Which one of the following is not one of the five Cs of credit?
a. Conditions
b. Climate
c. Character
d. Capacity
Finance 1200 Spring 2016 Chapter 6
Most of the information in your credit file may be reported for only
__________ years.
a. 7
b. 15
c. 20
d. 23
_____10. Which federal law provides specific cost disclosure requirements for the
annual percentage rate and the finance charge as a dollar amount?
a. Truth in Lending Act
b. Fair Credit Reporting Act
c. Fair Credit Billing Act
d. Equal Credit Opportunity Act