Chapter 5 questions
An escrow account is used to collect _____ from one's monthly mortgage payment. A. operating expenses B. principal C. interest D. real estate taxes E. closing costs
D
Assume that you have taken a car on a closed-end lease for a period of 5 years. At the end of the fifth year, you would need to pay additional money only: A. when the mileage limits are not exceeded B. when the residual value is lower than expected C. when the residual value is more than expected D. when the mileage limits are exceeded
D
Most homeowners get financial benefit from owning a home as it results in: A. the creation of a recession proof liability B. adding to the hidden costs of mortgage payments C. reducing non-depreciating assets D. tax savings due to tax shelter E. saving tax liability by tax evasion
D
The majority of each monthly payment at the beginning of the loan goes to pay the: A. private mortgage insurance. B. real estate taxes. C. principal. D. interest E. homeowner's insurance
D
As home prices have fallen in recent years, the rent ratio: A. has increased and rent attractiveness has stabilized B. and rent attractiveness have increased C. has increased and rent attractiveness has decreased D. has decreased and rent attractiveness has increased E. and rent attractiveness have decreased.
E
Jackie is in the 28 percent marginal tax bracket and has no other itemized deductions except those related to her home. If she is eligible for a standard deduction worth $6,100 and she incurs the following costs related to housing, how much tax savings will she receive as a result of her home purchase? Mortgage interest $14,000 Principal repayment $ 800 Homeowner's insurance $ 1,000 Real estate taxes $ 4,000 Homeowner's association fees $ 1,200 A. $5,040 B. $2,800 C. $0 D. $13,250 E. $3,332
E
Which of the following are tax deductible if one itemizes deductions? A. Interest, real estate taxes, and insurance B. Principal, interest, and real estate taxes C. Principal, interest, real estate taxes, and insurance D. Principal and interest E. Interest and real estate taxes
E
Which of the following is a fixed auto ownership cost? A. The maintenance and repair costs B. The cost of fuel C. The cost of tires D. The cost of oil E. The cost of automobile insurance
E
Which of the following is true of buying a used car as compared with a new car? A. A used car will have a higher residual value than a new car B. The accessories in a new car will be better updated compared with those fitted in a new car C. The fuel efficiency in a used car is always higher compared with that of a new car D. A used car will be in a better mechanical condition compared with a new car E. Purchasing a used car will be less expensive as compared with purchasing a new car
E
A financing made available by a builder or seller to a potential new-home buyer at interest rates well below market interest rates, often only for a short period is termed as a: A. buydown B. convertible ARM C. two-step ARM D. conventional mortgage
A
The property listing in a local multiple listing service (MLS) cannot be accessed by all buyers and sellers. A. true B. false
A
A foreclosure happens when: A. the borrower is planning to restructure the loan taken for making mortgage payments B. the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral C. the borrowers repay their housing loan well before the estimated closing period of the loan D. the value of a house is higher than the loan taken on the property E. the rates of interest prevalent in the housing market are extremely volatile, forcing the lender to demand additional collateral from the borrower
B
If your lender charges 1.5 mortgage points on a house selling for $100,000, on which there is a $90,000 loan, the points will cost you A. $150 B. $1,350 C. $2,850 D. $1,500
B
Janet is considering the purchase of a condo for $150,000 during a recession phase, partly financed by a mortgage. She is due to retire in a few years. If she cannot make her mortgage payments on time, she is bound to incur a: A. neutral equity on her property B. foreclosure of her house C. higher rent ratio D. reduced residual value of the property
B
The financing rate on a lease similar to the interest rate on a loan is called the _____. A. capitalized cost B. money factor C. purchase option D. lease point E. residual rate
B
The first step in the auto-buying process should be: A. to decide whether to trade in your used car or to sell it yourself B. to analyze how much you can afford to spend on the car C. to consider alternative buying strategies D. to test-drive several automobiles E. to begin negotiations on various automobiles
B
You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You have: A. signed up for a conventional mortgage B. experienced a negative amortization C. refinanced your loan D. taken a fixed-rate mortgage
B
A veteran might be able to buy a home with no down payment with: A. an FHA mortgage insurance B. a conventional mortgage C. a VA loan guarantee D. a buydown
C
If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 80 percent, then the borrower must make a down payment of at least _____ A. $100,000 B. $180,000 C. $20,000 D. $120,000 E. $80,000
C
If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 90 percent, then the borrower must make: A. a maximum down payment of $10,000. B. a maximum down payment of $10,000 including closing costs and mortgage points C. a minimum down payment of $10,000 plus closing costs D. a minimum down payment of $90,000 including closing costs E. a minimum down payment of $10,000 including closing costs
C
