Extra credit

PERSONAL FINANCE

The new bankruptcy law requires a financial course before filers can erase their debts and exit bankruptcy. Here are questions the course might address:

October 30, 2005|By EILEEN AMBROSE

1. Which of the following investments has the highest level of risk?

a) Money-market account

b) Individual stock

c) U.S. savings bonds

d) Mutual funds

2. The best way to determine the cost of a mortgage would be to look at the:

a) Number of monthly payments

b) Monthly payment amount

c) Interest rate

d) APR (annual percentage rate)

3. Beginning at age 18, if you saved $3,000 a year for five years and earned an annual return of 10 percent over 47 years, at age 65 how much money would you have?

a) $55,000

b) $165,000

c) $460,000

d) More than $1 million

4. Compounding of interest is a powerful force because:

a) Bankruptcy judges require it

b) Interest you earn also earns interest

c) Only insured accounts are allowed to earn it

5. If you claim the right number of dependents for your payroll deductions, at the end of the year you should receive:

a) No tax refund

b) A small tax refund

c) A reasonable tax refund

d) The largest possible tax refund

6. One of the provisions of the Fair and Accurate Credit Transactions Act, or FACT Act, allows you to:

a) Repair your credit score

b) Place a consumer statement on your credit report

c) Receive a free copy of your credit report from each of the three major credit bureaus

d) Both a and b

7. The best way to improve a damaged credit history would be to:

a) Contact a credit repair company

b) Establish a record of timely payments

c) File for bankruptcy

d) Dispute inaccurate information

8. Credit-card, student loan and recent tax debts are among the debts that can be discharged in a Chapter 7 bankruptcy.

a) True

b) False

9. A FICO score is:

a) The spread between assets and liabilities

b) A number representing your creditworthiness at a particular time

c) An interest rate determination set by the bank

10. A good way to cut insurance costs is to:

a) Ask for a multiple-policy discount

b) Ask for discounts for safety features

c) Increase your deductibles

d) All of the above

11. Things to consider when planning to buy life insurance include:

a) How healthy you are

b) Whether you have dependent children or a dependent spouse

c) How much insurance you currently have

d) Both b and c

12. Which type of life insurance has an investment component that goes beyond straight insurance coverage?

a) Term life

b) Whole life

c) Health insurance

d) Roth IRA

13. Higher deductibles on insurance will lower your monthly payment, but increase your risk of out-of-pocket expenses.

a) True

b) False

14. Your credit score is based on:

a) Your income and your outstanding debts

b) Your employment and your outstanding debts

c) Your income and your payment history

d) Your payment history and your outstanding debts

15. You risk losing all of the money in your bank account if you don't report the loss of your debit card within:

a) Two days

b) 30 business days

c) 60 business days

d) One year

16. Chapter 7 bankruptcies stay on your credit report for _______ after discharge.

a) Five years

b) Seven years

c) 10 years

17. Once a Chapter 7 discharge of debts has occurred, you must wait at least _______ before filing for another Chapter 7 bankruptcy.

a) Four years

b) Six years

c) Eight years

18. On a credit report, most negative information can remain for a maximum of seven years from the time it was reported.

a) True

b) False

19. To fight against identity theft and unauthorized credit card use, it is wise to purchase credit protection products.

a) True

b) False

20. Which of the following loans offers a line of credit you can use anytime you wish?

a) Auto loan

b) Home-equity loan

c) College loan

d) Home-equity line of credit

Sources: Consumer Credit Counseling Service of Middle Georgia Inc., Consumer Credit Counseling Service of San Francisco, Credit Education Bureau, Family Credit Counseling Service., InCharge Education Foundation Inc., Institute for Financial Literacy, Money Management International and Novadebt

Answers to credit quiz

Answers

1) b

2) d

3) d

4) b

5) a

6) c

7) b

8) False. Only unsecured debts such as credit card balances, medical bills and collection accounts may be discharged.

9) b

10) d

11) d

12) b

13) a

14) d

15) c

16) c

17) c

18) True. Exceptions include: Chapter 7 bankruptcy (10 years); student loan defaults and child support arrears. Both may remain indefinitely until paid.

19) False. The Fair Credit Billing Act limits your responsibility for unauthorized charges to $50 when reported in a timely fashion and stipulates you won't be charged for goods and services you didn't accept or that weren't delivered.

20) d

Scoring

20 correct - Who needs Ben Bernanke for Fed chairman when you're available.

15-19 correct - Not quite banker material, but your checks don't bounce.

10-14 correct - Congratulations, you're average.

Below 10 - Slowly back away from the plastic.

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