Personal Finance Chapter 4 Test

Name:________________________________
Hour:__________
Personal Finance: Chapter 4 Test
Vocab:
1. _____________________________ Type of card issued by a bank that allows users to finance a
purchase
2. _____________________________ A decrease or loss in value
3. _____________________________ A yearly fee that’s charged by the credit card company for the
convenience of the credit card
4. _____________________________ Time frame that a loan agreement is in force, and before or at the
end of which the loan should either be repaid or renegotiated for another term
5. _____________________________ The length of time that the lender charges no interest on money
borrowed when paying off your balance in full each month
6. _____________________________ Cost of borrowing money on an annual basis; takes into account

the interest rate and other related fees on a loan
7. _____________________________ Preferred method of debt repayment; includes a list of all debts

organized from smallest to largest balance; minimum payments are made to all debts except for the
smallest, which is attacked with the largest possible payments
8. _____________________________ A detailed report of an individual’s credit history
9. _____________________________ An interest rate charged to a customer during the early stages of a

loan; the rate often goes up after a specified period of time
10. _____________________________ The maximum amount of money the lender is willing to loan an
applicant
11. _____________________________ A measure of an individual’s credit risk; calculated from a credit

report using a standardized formula
12. _____________________________ The charge for setting up a loan

Multiple Choice
1) ________________ Which of the following is not a factor in determining a FICO score?

A) Getting a personal loan from a bank B) Using credit cards
C) Paying cash for all purchases D) Taking out a mortgage on a house
2) ________________ Which of the following things cannot be done with a debit card but can be done with a credit card?
A) Go into debt B) Rent a car
C) Purchase something online D) Purchase an airline ticket
3) _______________ Which of the following is the most cost-effective option for purchasing a home?
A) Get a 15-year mortgage with a 5% down payment.
B) Get a 30-year mortgage so that you can get the lowest possible payments.
C) The most ideal way to buy a house is with 100% down; if that is not an option, you should get no more than a 15-
year, fixed rate mortgage with a down payment of at least 10%.
D) Get a 30-year mortgage with a 20% down payment.
4) _______________ Which of the following is not recommended in the debt snowball method of getting out of
debt?
A) List your debts in order from smallest to largest balance and focus on paying the smallest debt off first.
B) Every extra dollar you get should be thrown at the largest debt first.
C) Attack your debt with intensity.
D) Every time you pay off a debt, you add its old minimum payment to your next debt payment.
5) _______________ A credit score is intended to measure:

A) Your financial success
B) The risk of your not repaying debt
C) Your income level
D) The amount of money you have in the bank
6) _______________ Almost __________ percent of Americans are living paycheck to paycheck:

A) 50 B) 70
C) 60 D) 80
True/False
1. ______________ If you are a victim of identity theft, you are only responsible for paying back half of
the debt
2. ______________ You need to have a credit card to rent a car or check in to a hotel
3. ______________ Co-signing a loan is a good way to help a friend or relative

4. ______________ Staying away from car payments by driving reliable used cars is what the typical
millionaire does
5. ______________ A new car loses 50% of its value in the first 4 years
6. ______________ A car lease is the most expensive way to finance and operate a vehicle
Short Answer
What are the 5 foundations?
1. _______________________________________________________________________
2. _______________________________________________________________________
3. _______________________________________________________________________
4. _______________________________________________________________________
5. _______________________________________________________________________
What are the 5 steps to get out of debt?
1. _______________________________________________________________________
2. _______________________________________________________________________
3. _______________________________________________________________________
4. _______________________________________________________________________
5. _______________________________________________________________________
What are the names of the 3 main credit bureaus?

1. ____________
2. ____________
3. ____________
What 3 things should you consider before purchasing a house?
1. _______________________________________________________________________
2. _______________________________________________________________________
3. _______________________________________________________________________
When you use cash instead of plastic you spend how much less?
What things can you do to protect yourself from identity theft? (Give at least 3 ideas from the chapter)
What are 2 main reasons that teens are a huge target market of credit card companies?
Scuba Steve has $1,000 each month that he would like to use to pay off debts. Use the table below to answer
the following questions:
What will the payment to each loan be in month 1?
Mastercard $ _______ Visa $ _______ Car $ _______
Student Loan $ _______ Scheels $ _______
List the loans in order of priority for paying off:
1. ____________
2. ____________
3. ____________
4. ____________
5. ____________
Extra Credit: What was Dave’s sisters goat named when they were kids?

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Name:________________________________

2. _____________________________ A decrease or loss in value

6. _____________________________ Cost of borrowing money on an annual basis; takes into account

7. _____________________________ Preferred method of debt repayment; includes a list of all debts

8. _____________________________ A detailed report of an individual’s credit history

9. _____________________________ An interest rate charged to a customer during the early stages of a

11. _____________________________ A measure of an individual’s credit risk; calculated from a credit

12. _____________________________ The charge for setting up a loan

1) ________________ Which of the following is not a factor in determining a FICO score?

5) _______________ A credit score is intended to measure:

6) _____ Almost percent of Americans are living paycheck to paycheck:

3. ______________ Co-signing a loan is a good way to help a friend or relative

What are the 5 steps to get out of debt?

What are the names of the 3 main credit bureaus?

What will the payment to each loan be in month 1?

Mastercard $ ___ Visa $ _ Car $ _____

Student Loan $ _ Scheels $ _

List the loans in order of priority for paying off:

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