21. If you borrow money on a single payment loan and discover you cannot pay it

Question

21. If you borrow money on a single payment loan and discover you cannot pay it back when it is due you should
a. let the payment become past due. b. consolidate the loan. c. convert the loan to installments. d. negotiate a rollover e. file bankruptcy

22. When the simple interest method is used to determine finance charges, the interest is calculated based on the
a. ending balance of the loan. b. average outstanding balance. c. actual balance of the loan. d. beginning balance of the loan. e. none of these.

23. A(n) ____ clause gives the lender legal recourse in collecting the debt if the borrower does not pay.
a. add-on b. sales c. acceleration d. garnishment e. balloon

24. Installment loans using the simple interest method
a. have the highest finance charges of any method. b. have interest charged only on the monthly loan balance. c. do not have balloon payments. d. have a lower APR than the stated interest rate. e. have a higher APR than the stated interest rate.

25. A legal claim that allows credits to liquidate loan collateral is a
a. loan. b. note. c. security claim. d. lien. e. none of these

26. The basic purpose of insurance is to
a. protect your health. b. protect you from losses. c. supplement your income. d. shield you from bad decisions. e. none of these

27. Insurance is a tool that can lessen ____ risk.
a. social b. mental c. economic d. accident e. exposure

28. Which of the following types of policies is most likely to allow you to switch investments?
a. limited pay life b. whole life c. variable life d. term life e. adjustable whole life

29. Mike purchased a whole life policy with a face value of $1,000,000 and dies several years later. At the time of his death, Mike has: paid a total of $12,000 in premiums; accumulated $25,000 in cash value; received a total of $5,000 in policy dividends; and has a $10,000 policy loan outstanding. If Mike's beneficiaries elect to receive a lump-sum distribution of death benefits, how much will it be?
a. $1,025,000 b. $1,015,000 c. $1,000,000 d. $ 990,000 e. $ 985,000

30. Purchasing auto insurance with a $500 deductible is an example of
a. risk transfer to an insurance company. b. risk reduction of $500. c. risk assumption of $500. d. a and b. e. a and c.

Explanation / Answer

21 C 22 B 23 B 24 D 25 A 26 A 27 C 28 B 29 B 30 D

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