Question

unit 4 test: credit, credit scores/reports, and identity theft
question 1
what is credit?
a money allocated to a specific account for future use by the consumer without borrowing
b goods, services, or money received in exchange for a promise to pay a definite sum of money at a future date
c the ability and willingness of an individual to pay back a loan as perceived by the lender
d an individuals character, capital, capacity, collateral, and conditions
question 2
what is one characteristic of closed - end credit?
a it is a continuous loan the borrower must repay with a revolving balance
b equal payments are required on a regular basis until the loan is repaid
c credit limits vary depending upon the loan balance
d interest rates vary depending upon repayment history

Explanation:

Question 1

To determine the correct definition of credit, we analyze each option:

• Option A: Describes money for future use without borrowing, which is not credit (credit involves borrowing). Eliminate A.
• Option B: Credit is receiving goods, services, or money with a promise to pay later. This matches the definition of credit.
• Option C: This describes creditworthiness (the ability to repay), not credit itself. Eliminate C.
• Option D: This refers to the "five Cs of credit" (factors for evaluating creditworthiness), not the definition of credit. Eliminate D.

To identify a characteristic of closed - end credit, we analyze each option:

• Option A: Closed - end credit is not a continuous loan with a revolving balance (revolving balance is for open - end credit like credit cards). Eliminate A.
• Option B: Closed - end credit (e.g., a car loan, mortgage) requires equal payments (installments) on a regular basis until the loan is fully repaid. This is a key characteristic.
• Option C: Credit limits varying with loan balance is a feature of open - end credit, not closed - end. Eliminate C.
• Option D: Interest rates varying with repayment history is more related to how lenders adjust rates for risk, not a defining characteristic of closed - end credit. Eliminate D.

Answer:

B. Goods, services, or money received in exchange for a promise to pay a definite sum of money at a future date

Question 2