HW 4 - (given) Answers - ACE 245(2007 Exercise 4 Credit...

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ACE 245 (2007) Exercise 4 Credit Management (Due October 24 in class) Instructions: Be sure to include your name and section at the top corner of each page. Select the best answer for each question. Each one is worth 1 point except as indicated . For the short- answer questions, turn in typed answers or spreadsheets showing your work. 1. Ding uses his credit card frequently and carries over a large balance from month to month. Which type of card would be most financially prudent for him? a. No annual fee, average interest rate, and short grace period b. No annual fee, average interest rate, and long grace period c. High annual fee, low interest rate, and average grace period d. Average annual fee, average interest rate, and short grace period e. Low annual fee, low interest rate, and average grace period 2. For which purpose(s) does the use of credit make most sense for building long-term financial net worth? a. Acquisition of appreciating assets (e.g., education) b. Acquisition of tax-favored assets (e.g., home ownership) c. Acquisition of depreciating assets (e.g., autos, furniture) d. Both answers a and b e. Both answers b and c 3. Which action contributes most to establishing creditworthiness? a. Borrowing informally from a relative b. Minimize savings and checking accounts c. Applying for and using a debit card d. Making installment loan payments on time e. Not declaring bankruptcy for a period of four years
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