PERSONAL FINANCIAL MANAGEMENT (FTX2000S)
MODULE 3 - SAVING AND MANAGING CREDIT
TUTORIAL 9 - HAND IN DATE: MONDAY 30 SEPTEMBER 2024
QUESTION 1 - Practice quiz (Submit)
1. The interest rate that the South African Reserve Bank (SARB) charges banks for funding is known as
the ______ rate.
a. Repurchase
b. Prime
c. Floating
d. Quarterly
2. Which of the following is not a possible vehicle for savings?
a. Currency speculation
b. Unit trusts
c. Mortgage repayments
d. Money market funds
3. Saving and retirement decisions are related.
a. True
b. False
4. Automating the savings process could include:
a. Signing a debit order for unit trust payments
b. Monthly transfers into a money market account
c. Carefully considering every purchase
d. Ensuring that income does not determine spending
5. When an individual’s attached assets are sold, the proceeds are used only to repay debts and
interest.
a. True
b. False
6. You have to pay a lender this week, but will only receive enough money for this next week. This
problem is usually solved with:
a. Bridging finance
b. Payment default
c. Interest-free loans
d. Debt extension
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Assignment 9
7. The four “Cs” of credit include:
a. Capital
b. Character
c. Credit record
d. Convenience
8. Credit that remains available provided the borrower keeps making repayments on previously used
credit is called:
a. Revolving credit
b. Instalment credit
c. Credit card credit
d. Running credit
9. Which of the following is not true of credit cards?
a. They can be used at all merchants.
b. Credit cards involve annual fees.
c. A credit card can give you as much as 55 days free credit.
d. One of the credit card payment options is a “budget” purchase.
10. Store cards are a cost-effective way of purchasing at retailers.
a. True
b. False
11. For a fixed interest rate amortising loan, the interest payable each month is based on the:
a. Capital remaining at the beginning of the month
b. Original capital amount of the loan
c. The declining payment every month
12. If the prime rate is 13% and a loan is compounded at prime plus two on a monthly basis, the
compounding factor is:
a. 1.25%
b. 2.5%
c. 15%
d. 13%
13. Debt to disposable income ratios are:
a. Used by potential lenders
b. Calculated as debts to total salary
c. Best kept as high as possible
d. Disposable income divided by debt cost
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Assignment 9
14. People who do not have a credit record have a better chance of obtaining credit than those who do.
a. True
b. False
15. Which of the following does debt consolidation not do?
a. Reduce the overall cost of the debt
b. Reduce the monthly repayment
c. Extend the average term of the debt
d. Reduce the number of creditors
16. Saving a little every month is not as efficient a way to save as saving a single big amount.
a. True
b. False
17. In finance, the matching principle states that:
a. The term of debt should match the life of the assets it funds.
b. The type of debt should be matched to the person’s lifestyle.
c. Debt should be matched to the ability to repay the debt.
d. The amount of debt should be matched to the amount of assets.
18. Surety can be seen as a form of collateral.
a. True
b. False
19. The large final payment that is sometimes part of a vehicle financing agreement, and which allows
for the monthly repayments to be reduced, is known as a ______ payment.
a. Balloon
b. Terminating
c. Down
d. Closing
20. Negotiating with creditors when unable to repay debt is a good idea.
a. True
b. False
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Assignment 9
QUESTION 2 (Submit)
There are currently different forms of credit offered in South Africa.
1.1 Name 4 different forms of credit offered by business and provide a brief explanation of each.
1.2 Briefly discuss the advantages and disadvantages of each form of credit.
Please present your answer as follows:
Forms of credit Advantages Disadvantages
QUESTION 3 (Submit)
Briefly name and discuss the four C’s before extending / granting credit.
QUESTION 4 (Voluntary) (14 MARKS: 17 MINUTES)
Source: Personal Financial Management (FTX2000S) Supplementary examination 20 January 2016 Q2A
1. Name 5 good saving habits.
(5 marks)
2. Many people have Debt to Disposable Income ratios in excess of the acceptable rate of 35%. Provide
five (5) actions that a person could implement to improve his / her financial situation.
(5 marks)
3. Excessive borrowing can have severe consequences for individuals. Name and explain any two (2)
consequences that an individual will be exposed to when they borrow beyond their financial
capability (ability to repay).
(4 marks)
“I’m living for far beyond my income that we may almost be said to be living apart.”
E.E. Cummings Poet (1894 – 1962)
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Assignment 9
