Finance exam 2

an example of an open account credit would be a bank:

credit card

____ is a loss of the value of a asset such as an automobile that occurs over the period of ownership

depreciation

consolidation loans are generally:

expensive

the key to credit worthiness is to keep your debt safety ratio as high as possible

false

using credit is the ideal way to provide for financial emergencies

false

you can stop payment when you purchase an item with your debit card

false

commercial banks are insured by FDIC, what does FDIC stand for

federal deposit insurance corporation

credit unions are more likely to be paying _____ interest on accounts than a commercial bank

higher

the decision whether or not to grant you credit will be made by

individual creditors

home owners may be able to deduct ___ from taxes

interest

having some type of overdraft protection with your bank will end up costing more or less than having a check bounce

less

it would make sense to purchase a vehicle at end of a close ended lease if the car is more or less in value

less

____is another term for landlord

lessor

credit unions are:

member owned financial corporatives

a person who pays of their credit balance every month should look for a credit card with

no annual fee

an improper use of extended credit would be to buy

non-durable goods

the most popular use of consumer loans is to do what:

purchase a car

borrowing from relatives is

seldom

to establish credit worthiness, you should first do what:

start a checking and savings account

the best loan rates for consumer loans are usually from

the consumer finance companies

sometimes it may be better to use savings rather than borrowing to make a purchase, this would be recommended when:

the cost of borrowing is greater than the interest earned on the savings

most creditors will or will not be willingly to work something out with you if you're having difficulty meeting your payments

they will

a close ended automobile lease is the most popular type of lease

true

a loan to value ratio of 80% would require a buyer to make a 20% downpayment

true

as a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on property

true

automobile tend to decrease in value overtime

true

banks credit card cash advances will begin accruing interest charges immediately

true

collateral is an item of value used to secure the principle portion of a loan

true

consumer loans are most commonly used to obtain durable goods

true

credit union members are expected to have some common bond

true

credit unions grant loans only to members of the credit union

true

having a range and fully repaid a small loan should help improve your credit readiness

true

one could expect to earn a higher rate of interest on a certificate of a deposit than on a checking account

true

the FDIC insures depositors funds up to 250,000 at member banks under the same depositors name

true

the largest single investment you will undertake in your lifetime will probably be the purchase of a home

true

the purpose of a credit report is to evaluate the kind of risk you pose to the lender

true

when buying a used car have it checked out by a mechanic

true

5 C's of credit

- Character: borrowers willingness to live up to the terms of the loan - Capacity: ability of the Borrower to service the loan in a timely fashion. - Collateral: Something of value that's used to secure a loan and that the lender can claim in case of default - Capital: The amount of assets owned by the borrower used as another indicator of ability to repay the loan - Condition: economic conditions that could affect the borrower's ability to service a loan

as a percentage of your take home pay, monthly consumer credit payments should not exceed what percentage:

20%

an important rule for establishing a savings plan is to what:

all the above

researching used car prices, you can check one of the popular car guides:

all the above

the first step in the auto buying process should be:

analyze how much you can spend on the car

low interest rates that have persisted since the financial crisis have been a net benefit to

borrowers

an investor would typically expect to receive higher interest rates on

certificate of deposit

a checking or savings account is called a demand deposit account

checking

with a close ended or open ended lease you turn in the car at the end of the term and have no additional financial obligations

close ended