chapter 9 personal finance

¡Supera tus tareas y exámenes ahora con Quizwiz!

because interest is usually tax deductible and payments are deferred until you graduate, it is good advice to take out the maximum student loan for which you can qualify

false

buying a new car online is just about as efficient as buying an airline ticket or a book

false

collateral is defined as assets of the lender that back a secured loan in the event of default

false

even an unsecured personal loan should be backed by collateral

false

in determining the amount of your loan, you should ask for 20% more than you need in order to give yourself financial flexibility in the future

false

in securing personal loans from family members or friends, the loan agreement should be verbal or just consist of a "gentlemens understanding"

false

it is usually better to lease a vehicle than buy one, since you are not responsible for the repairs r maintenance on a leased car

false

leasing a car is a good option if you drive many miles a year

false

on an amortization schedule, more interest and less principle is paid each month as the loan matures

false

shopping for automobile insurance should begin immediately after you close the deal on the car

false

the monthly payment for a loan is dependent only on the size of the loan and the interest rate

false

when applying for a personal loan, you will be required to fill out a loan application but you will seldom need a personal balance sheet or a personal cash flow statement

false

which of the following is the most common source of financing for personal loans

financial institutions

collateral

gives the lender additional resource if the payments are not made

making extra payments on a loan does all of the following except

gives you extra income for living expenses

which of the following is not an interest rate calculation method discussed in the text

sum of the digits interest

the size of the monthly payment on a loan is dependent on all of the following except

the borrowers age

in which of the following scenarios would you favor leasing over purchasing a car

the car in question is one whose value depreciates rapidly

longer maturities for loans result in lower monthly payments and therefore make it easier to cover payments each month

true

the decision to purchases versus lease a car is highly dependent on the estimated market value of the car at the end of the lease period

true

the most common source of financing for a personal loan is from a financial institution

true

there are limits on how much a student can borrow through federal student loans, so many students also have to obtain private loans from financial institutions

true

when borrowing money from a family member or a friend, the loan agreement should be in writing and signed by all parties to avoid any possible misinterpretations

true

for which of the following items would a personal loan be a better option than a credit card for a college student?

tuition and dorm fees

the cost of leasing a car versus purchasing one

varies depending on a multitude of factors

considerations in selecting a car should include all of the following except

what kinds of car your really want, regardless of what you need

when deciding whether to trade in a car or sell it privately, which of the following is not a consideration

year, make and model of the car

personal loans include all of the following except

mortgage loans

you obtain a loan of $3000 based on simple interest with an annual interest rate of 12%, or 1% a month. if the first payment is $300, how much is the principal portion of the payment

$270 300- (3000*0.01)

you obtain a loan of $3000 to be repaid over one year. assume you are charged 12% interest based on the add-on method. your monthly payments would be

$280 3000*.12= 360 3000+360= 3360 3360/12= 280

you obtain a loan of $3000 based on simple interest with an annual rate of 12%. at the end of the first month, the interest owed on $3000 is

$30 (3000*.12) / 12

which of the following are important factors in determining the monthly lease price of a new car

- purchase price or capitalized value -"money factor" or interest rate embedded in the lease -residual value of the car included in the lease contract

you could reduce the interest rate you are paying on loans by

-refinancing to a secured loan -paying off credit card debt with a home equity loan -refinancing to a shorter term loan

list 4 components of a loan contract

1. amount of loan 2. interest rate 3. loan repayment schedule 4. length of loan 5. collateral

loan contract

a contract that specifies the terms of the loan agreed to by the borrower and the lender

which of the following would probably not be required when applying for a personal loan

a personal resume

which of the following methods of calculating interest is the most expensive

add-on interest

the method of determining the monthly interest amount by adding the interest and loan principle together and dividing by the number of payments is the

add-on interest method

what should you not consider when selecting a vehicle

all parts are american made

the APR measures the finance expenses (including interest and all other expenses) on a loan on a

annualized basis

automobile insurance rates are likely to differ for all of the following reasons except some cars

are moe popular than others

collateral

assets of a borrower that back a secured loan

if you always drive cars many miles and keep them for 10 years, it would probably be best to

buy a new car

personal loans include which of the following

car loans home equity loans

which of the following is NOT usually used as collateral for a loan

clothing

disadvantages of leasing a vehicle include all of the following except

cost of finding a buyer for the car at the termination of the lease

having a longer term loan

costs you more interest and therefore increases the cost of your loan

which of the following is not included in the loan contract

credit score

in making the purchase versus leasing decision, it is important to remember that

dealers may impose an additional mileage cost

loan application

disclosure of information including a balance sheet and cash flow statement

what is the correct chronological order of the items listed below

good credit history, loan application, loan contract, repayment schedule

a personal loan is different from a credit card in all of the following except it

has a longer grace period

the more expensive the car, the _______ the payments, and the ____ you can put toward other investments

higher, less

which of the following statements about student loans is not true

if you dont complete your education, you will not have to pay back the student loan

over the life of a loan, the payment to principal _______ and the portion to interest expense _______

increases, decreases

all of the following provide personal loans except

insurance companies

which of the following is a true statement about student loans

interest payments on some loans are deferred until the students graduate and enter the workforce

simple interest

interest rate multiplied by the principal

regarding automobile insurance,

it is better to compare costs before you commit to buying a particular car

you could reduce the size of your monthly payments by

lengthening the maturity of the loan

maturity

life or duration of a lona

when considering how much money to spend on the purchase of a new car, you must consider how your choices affect your spending on other needs. the _____ solution limits your credit card purchases to what you can afford to pay off when your credit card bill arrives each month

limited debt

the document that specifies the term of the loan as agreed to by the borrower and lender is called the

loan contract

when the borrower and the lender have agreed to the specific terms of the loan these ill be included in the

loan contract

the loan contract identifies all of the following except

loan officer

unsecured loan

loan that is not backed by collateral

all of the following are true to peer-to-peer lending, except

loans are available only for amounts less than $1,000

the ____ the maturity of a loan, the _______ the payments

longer, smaller shorter, larger

if you are considering trading in a used car when you purchase your new one, it is best to

make the trade in deal a separate transaction from the new car deal

advantages of leasing a vehicle include all of the following except

no maintenance cost

which of the following items must you provide when applying for a loan in order to prove you have collateral to back your loan

personal balance sheet

common practices used by dishonest lenders include all of the following except the lender

prohibiting the borrower from purchasing insurance or other financial services as a condition of the loan

APR

rate that measures the finance expenses

if you double the principal repayment called for on your car loan each month without doubling the interest payment, you will

reduce the term of the loan by half

purchasing a car is a big decision. therefore you should not

rely on the dealer personnel as the best source of expert advice

in the past you have purchased cars that you have driven for 10 years or more. the mileage on these vehicles usually exceeded 100,000 and therefore you would just give them to a younger family member. based on this history, your primary financial consideration in selecting a car will be

repair expense

which is true regarding resale value of cars

resale values can be determined from the Internet and other sources and should be a consideration in buying a car

when negotiating the price of any car, which of the following statements is true

sales people are trained to act as if they are giving the car away

if the lender has the right to take certain specified assets of the borrower in the event of a default on the loan, the loan is a _____ loan

secured

if you agree to allow the lender to take your computer in the event you fail to make payments, the loan is which of the following

secured

which kind of loan generally charges the lowest interest rate

secured loan

personal loans from family members or friends

should have a loan agreement in writing to avoid problems later on

______ is a method of computing interest based on the existing principal amount of the loan

simple interest

the personal loan process with a financial institution requires all of the following except

sitting through an interview

the truth-in-lending act requires which of the following

specifying loan rate standardization

when assessing the condition of a used car, you should carefully consider all of the following except

the insurance premium the previous owner paid

all of the following are true regarding a cosigner on an account except

the lender may not seize the assets of the cosigner

in a loan repayment schedule, the term amortized refers to

the repayment of the principal and interest through a series of equal payments

the most favorable car financing is that of

there is no one best deal every time; it pays to shop around

a personal loan is different from a credit card in that it is normally used to finance one large purchase

true

advantages of leasing a car instead of buying one are that you need less of a down payment and that you do not need to worry about finding a buyer for your car when the lease is over

true

auto loan interest sites are a good source to estimate the maximum amount you can borrow, based on financial information you provide

true

buying a car from a dealer with a set price ( a no haggle dealer) is usually more stress-free and less time consuming

true

if a loan is cosigned and the borrower defaults, the lender has the right to sue the cosigner or try to seize the cosigners assets just as if that person were the borrower

true

if the interest rates are the same, a loan using add-on interest will have higher payments and charges than a loan using simple interest

true

in general, you will receive more favorable terms on a secured loan than on an unsecured loan

true

it is important to buy a car that is not over your budget and to finance the car properly. the more money need to cover the car payments, the less you can add to your savings or other investments

true

which of the following is a key benefit of leasing

you are able to drive a more expensive car for the same n=monthly payment versus buying

regarding the amount of money borrowed on a loan, all of the following are true except

you should borrow slightly more than you need to cover future inflation

the advantage to financing a car for a long period of time (of up to 7 years) is

your monthly payment will be lower


Conjuntos de estudio relacionados

PSYC 315 - The Modern Unconscious - Midterm 3

View Set

1 - Basic Concepts of Strategic Management

View Set

Sleep, Dreaming, and Circadian Rhythms

View Set