Chapter 5



Unit 4 Questions-CreditList two advantages and two disadvantages of using credit (borrowing money).A=What is the difference between closed-end and open-end (revolving) credit? Please give an example of both.A=Use the ‘debt payments-to-income ratio (p. 165) to determine whether or not the following people can afford their prospective loans (remember the percentage has to be below 20 percent):Debt Payments to Net Income RatioDebt Payments=car payment, mortgage, student loan payment, credit card. Please do not confuse this with expenses or monthly bills (i.e. rent, cell phone bill, utilities, etc.).Net Income=take home pay—your paycheck after deductions (i.e. taxes) have been taken out.The Rule=your monthly debt payments should not exceed 20 percent of your net income.Debt Payments = .2 or lessNet IncomeRick-Monthly net income=$1,400-Current monthly debt=$150*He wants to buy a car…$300 a month will be his paymentDarrell-Monthly net income=$3,775-Current monthly debt=$50*He wants to buy a home…$700 a month will be his paymentCan Rick afford to take on this new loan? (show calculations)A=Can Darrell afford to take on this new loan? (show calculations)A=Maggie-Monthly net income=x-Current monthly debt=$150*She wants to take out a student loan…$200 a month will be her paymentCarroll-Monthly net income=x-Current monthly debt=$600*She wants to buy a home…$1300 a month will be his paymentHow much does Maggie need to make to afford this debt? (show calculations)A=How much does Carroll need to make to afford this debt? (show calculations)A=List the 5 C’s of credit. Please define each. Of the five…which is/will be your greatest strength…which will be your greatest weakness? Why? A=List a minimum of three activities you can do to achieve a high credit rating.A=What should you do if you think your credit card has been lost and/or stolen? Please write out the steps you would follow.A=James, a high school senior, wants to get his girlfriend a special birthday gift. Hence, he cruises over to the Verizon store and considers purchasing her a new iPhone 63.2 Beta. Unfortunately, James does not have the necessary funds to pay cash for this purchase. Verizon is offering a special loan with only 5 percent APR for six months. James is tempted to finance (borrow money) in order to make this happen for his beloved gf. How would you advise James in this situation? Please explain your reasoning in a minimum of four sentences.A=What does it mean for a loan to require a co-signer? List at least one advantage and one disadvantage of a co-signed loan? Is there a situation where you would be willing to be the co-signer on a loan (the person with a good credit rating)? Is there a situation where you would be willing to be the co-signee on a loan (the person with a bad/zero credit rating)? ANSWER EVERYTHING…THERE’S A LOT GOING ON WITH THIS PARTICULAR QUESTION A=Please discuss the major differences between Chapter 7 and Chapter 13 personal bankruptcies.A=Please discuss with your parents/guardians/trusted adult their thoughts about borrowing money. Specifically, please bring up what you have learned about credit cards and ask how they feel about them…and how they would feel about you having one. Once this conversation is complete, please write a minimum of seven sentences summarizing your conversation.A= ................
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