Finance exam 1
The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be
$344
As a percent of take-home pay, monthly consumer credit payments should not exceed
20%
All of the following are useful ways to build a strong credit rating except
Apply for a long-term loan and occasionally be late with a payment.
A characteristic of consumer loans is that they
Are arrived at through a formal process, include a repayment schedule, are used to purchase big-ticket durable, goods and other items and include a negotiated contract
Asset management accounts are offered by most banks and are typically FDIC insured.
False
Generally speaking, the interest rates on credit cards are lower than any other form of credit.
False
Generally speaking, variable rate loans are desirable if interest rates are expected to increase over the course of the loan.
False
Marginal tax and average tax rate refer to the same thing.
False
The largest single investment you will undertake in your lifetime will probably be the purchase of an automobile.
False
The market price of a house is $125,000 and the homebuyer will borrow $100,000. Two points will equal $2,500.
False
The personal exemption for a student can be taken both by the parent and by the child.
False
The required monthly payment on an open account will be the smaller of a minimum dollar amount or a specified percentage of the balance.
False
You can stop payment when you purchase an item with your debit card.
False
William uses his bank credit card frequently; however, he always pays off the total balance on the card each month. What should William look for in a credit card given the way he uses a credit card?
No annual fee and long grace period
Ben and Jack both earned $60,000 this year. Ben (age 30) is married with two children, and Jack (age 68) is single with no dependents. Which of the following is true regarding the amount of Social Security taxes they will pay?
They will pay the same amount of Social Security taxes.
A 5 percent down payment will result in larger monthly mortgage payments than a 10 percent down payment on the same house for the same maturity mortgage.
True
A certified check is a personal check that the bank guarantees the funds are available.
True
A closed-end automobile lease is the most popular type of lease.
True
A lender will generally require mortgage insurance if the down payment is less than 20 percent.
True
A significant legal difference between a cooperative and a condominium is that the condominium owner normally holds a title to the property.
True
Compound interest means that a savings account earns interest on the interest previously earned.
True
Convenience and improved record keeping are two advantages sited for on-line bill payment.
True
Credit union members are expected to have some common bond.
True
Debit and ATM card transactions are linked to your checking account.
True
Debit cards look like credit cards, but they work like checks.
True
If your bank states that it compounds monthly, the effective interest rate (APY) will be greater than the nominal interest rate.
True
Joint checking accounts typically imply the right of survivorship if one party should die.
True
Low-balling is a sales technique where the salesperson quotes a low price for a car to get you to make an offer, and negotiates the price upward prior to signing the sales agreement.
True
Mortgage interest and paid home property taxes are both itemized deduction items.
True
One who leases an automobile is typically responsible for early termination costs, even when early termination is due to theft or auto accidents.
True
Revolving credit lines are often accessed by writing checks.
True
State income taxes and real estate taxes are both itemized deduction items.
True
The difference between the market value of your home and the balance of the mortgage is your equity in the property.
True
You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.
True
You should itemize deductions when total itemized deductions exceed the standard deduction.
True
Your savings will grow faster with monthly interest compounding than with quarterly interest compounding.
True
For tax purposes, head-of-household refers to
a single individual with dependents
Before taking out students loans, all the following should be considered except
a. personal resources b. grants c. federal student aid d. scholarships e. all of the above
You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the
add-on method
Rebate card work best for those who use the rebates and
charge large amounts on the card and pay the total card balance off monthly.
Besides the finance charge, you should also consider ____ when you shop for a consumer loan.
collateral loan maturity repayment penalties total cost of the loan (e. all of the above)
Interest will almost always begin to accrue immediately when you use a bank credit card to
get cash advances.
Interest rates on ____ are typically lower than on any other form of consumer credit.
home equity loans
The federal government gets the majority of its revenue from the ____ tax.
income
A legal claim that allows creditors to liquidate loan collateral is a
lien
You would typically not include ____ in your gross income.
life insurance death benefit payments
A loan from the cash value of your life insurance policy would be characterized by
no specific repayment date
The federal income tax is
progressive
Annual percentage rate is equivalent to
simple interest method
Commercial banks generally charge lower interest rates than other lending institutions because
they usually take only the best credit risks