finance midterm

A 64-ounce package selling for $3.20 would have a unit price of:

$0.05 per ounce

What is the affordable monthly mortgage payment if your yearly gross income is $48,000 and monthly payments on an auto loan are $320?

$1,200

chapter 7 chapter 7

chapter 7 chapter 7

chapter 8 chapter 8

chapter 8 chapter 8

chapter 9 chapter 9

chapter 9 chapter 9

Charles Rickman is applying for a loan from the bank. The bank has determined that he has never been late making payments on past loans. Which of the 5 Cs of credit is the bank looking at?

character

A valuable asset pledged to obtain a loan and subject to repossession upon default to satisfy the debt is called:

collateral

Future value calculations involve:

compounding

If you find that you cannot make your payments, the first thing you should do is:

contact your creditor and try to work out a modified payment plan with them

____________ are nonprofit organizations organized by member-owners to save money on various products and services. Their prices are usually lower than at other retailers.

cooperatives

What is the term used to refer to the cost of borrowing for large U.S. corporations?

corporate bond rate

Which one of the following agencies maintains data about the amount and terms of your credit and your paying habits?

credit bureau

A trust has the purpose of:

managing the assets of a person

Sue deposited $1,000 in an account paying 2 percent interest. The inflation rate is 5 percent. What is the buying power of the account after one year?

$970

Karen Price has determined that her net worth is $24,000, excluding her home. She owes $90,000 on her mortgage and $12,000 on a car loan. What is Karen's debt-to-equity ratio?

.5

What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage?

1.00

If you have declared personal bankruptcy, then this fact may be reported by credit bureaus for ____________ years.

10

If inflation is increasing at 3.6 percent per year, and your salary increases at the same rate, how long will it take your salary to double?

20 years

Tran Lee plans to set aside $3,000 a year for the next six years, earning 5 percent. What would be the future value of this savings amount?

20,406

The Homeowners Protection Act requires that a PMI policy be terminated automatically when a homeowner's equity reaches _____ percent of the property value at the time the mortgage was issued.

22

The assessed value of your home is the:

Value used to calculate property taxes

Which of the following is an example of a conventional mortgage?

a fixed rate mortgage

One example of closed-end credit is:

a mortgage loan

William Davis has a goal of "saving $60 a month for vacation." William's goal lacks:

a time frame

A multiunit dwelling with two, four, or six single-family living units is called:

a townhouse

Which one of these is the fairest method of calculating finance charges on a credit card?

average dailey balance method

Excessive indebtedness can result in:

Heavy drinking, a neglect of children, marital difficulties, and drug abuse. all

Henry Garrison starts the month with a balance on his credit card of $800. The average daily balance for the month including purchase is $683. The average daily balance for the month excluding new purchase is $550. The bank charges 1.5 percent per month and uses the average daily balance including new purchases method. What would Henry's finance charges be for the month?

$10.25

If a person spends $14 a week on coffee (assume $700 a year), what would be the future value of that amount over 12 years if the funds were deposited in an account earning 5 percent?

$11,141.90

Michelle Duncan wants to know what price home she can afford. Her annual gross income is $45,000. She owes $550 per month on other debts and expects her property taxes and homeowners insurance to cost $225 per month. She knows she can get an 8%, 30-year mortgage so her mortgage payment factor is 7.34. She expects to make a 20% down payment. What is Michelle's affordable home purchase price? Round your answer to the nearest $100.

$110,700

Brenda Young desires to have $21,000 eight years from now for her daughter's college fund. If she will earn 7 percent (compounded annually) on her money, what amount should she deposit now? Use the present value of a single amount calculation

$12,222

Duane Miller wants to know what price home he can afford. His annual gross income is $60,000. He has no other debt expenses and expects property taxes and insurance to cost $500 per month. He knows he can get a 6%, 15 year mortgage so his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duane's affordable home purchase price? Round your answer to the nearest $100.

$151,600

If you borrow $150 at 10 percent interest, how much will you repay in one lump-sum at the end of one year using simple interest?

$165

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Suzanne has $505,000 in a joint account with her husband, Ted. How much is not covered by FDIC insurance?

$2,500

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution. Suzanne has $520,000 in a joint account with her husband, Ted. How much is not covered by FDIC insurance?

$20,000

What would be the yearly earnings for a person with $8,000 in savings at an annual interest rate of 3.0 percent?

$240

If you desire to have $35,000 for a down payment for a house in six years, what amount would you need to deposit today? Assume that your money will earn 3 percent.

$29295

What would be the value of a savings account started with $2,700, earning 5 percent (compounded annually) after 8 years?

$3,987.9

An online buying club requires an annual fee of $45 in order to qualify for a 15 percent discount on purchases. What amount would a person have to buy in order to save enough to cover the cost of the membership?

$300

A family spends $30,000 a year for living expenses. If prices increase by 2 percent a year for the next three years, what amount will the family need for their living expenses after three years?

$31,830

Josh Collins plans to buy a house for $252,000. If that real estate is expected to increase in value by 5 percent each year, what will its approximate value be six years from now?

$337,680

Carla Lopez deposits $3,000 a year into her retirement account. If these funds have an average earning of 5 percent over the 50 years until her retirement, what will be the value of her retirement account?

$628,044

The future value of $1,100 deposited each year for 7 years earning 4 percent would be approximately:

$8,668

Isabel would spend $200 per week on groceries for her family if she did not use coupons. Her coupons save her 8 percent of that amount. She puts the amount saved into her savings account. How much will she have in her savings account at the end of the first year? Ignore interest earnings.

$832

If closing costs of $1,950 are associated with the refinance of a mortgage that would reduce the monthly payment from $890 to $780, it would take approximately ____ months to cover these costs.

18

If inflation is increasing at 4 percent per year, and your salary increases at the same rate, how long will it take your salary to double?

18 years

Private Mortgage Insurance is usually required if the down payment is less than _____ percent of the purchase price of the home.

20

Most of the information in your credit file may be reported for only ______ years.

7

A $220 savings account that earns $16.00 interest in a year has a yield of ____________ percent.

7.27

f you desire your savings to double in 8 years, what rate of return would you need to earn?

9%

chapter 6 !!!!

Chapter 6 !!!!!

Which of the following is a credit bureau?

Experian

A certificate of deposit usually has:

Penalty for early withdrawal

By evaluating your credit options, you may:

Reduce your finance charges, reconsider your decision to borrow money, discover a less expensive type of loan, find a lender that charges a lower rate.

The main goal of personal financial planning is managing your money to:

achieve personal economic satisfaction

A disadvantage of leasing an automobile would be the:

additional cost for turning the car in early

The stages in the family and financial needs of an adult are called the:

adult life cycle

All loans to or from family members should:

all

Before you sign a loan contract, make sure to:

all

Which of the following is/are a signal of potential debt problems?

all

Money that is usually deposited with the lending institution for the payment of property taxes and homeowner's insurance is called:

an escrow account

Comparison of earnings for different savings plans can best be accomplished using the:

annual percentage yield

A major activity in the planning component of financial planning is:

anticipating spending through budgeting

____________ is the settlement of a difference by a third party whose decision is legally binding.

arbitration

Which of the following is true of automobile service contracts?

automobile service contracts can cover repairs not included in the manufacturing warranty

Who is most likely to benefit from inflation?

borrowers

he problem of bankruptcy is associated with misuse of credit in the ______________ component of financial planning.

borrowing

A debit card:

decreases your account at the moment you buy goods or services

Jane Calvert is applying for a loan from a bank. The bank knows she owns a house worth $160,000 and a car with a trade-in value of $12,000 as well as other personal assets worth approximately $44,000. Which one of the 5 Cs of credit is the bank looking at?

capital

chapter 5 !!!!!!!

chapter 5 !!!!!

The debt payments-to-income ratio is:

calculated by dividing monthly debt payments (not including house payments) by net monthly income

The debt-to-equity ratio is:

calculated by dividing total liabilities by net worth

Checking accounts are frequently referred to as ____________ deposits.

demand

Sophia Martin is assessing her balances. She expects to retire in the next year and has $675,000 in savings and investments and owns her own home that is worth $250,000. Which step in the financial planning process does this situation demonstrate?

determining her financial plan

Savings compounded ____________ would have the highest effective yield.

daily

The purpose of the invoice price is to inform customers of the:

dealers cost

Lorenzo Cunningham has settled on purchasing a new Honda Accord and has found that the suggested retail price is $23,600 and that the dealer's invoice price is $21,500. It is time for him to go to a dealer and negotiate the price he will pay for his new car. What step in the purchasing process is Lorenzo carrying out?

determining the purchase price

Sophia Martin wants to travel after she retires as well as pay off the balance of the loan she has on the home she owns. Which step in the financial planning process does this situation demonstrate?

developing her financial goals

A question associated with the saving component of financial planning is:

do you have an adequate emergency fund

Which of the following is an advantage of renting an apartment?

easy to move

Paul Spoon has noticed that interest rates have risen in recent months. He is worried that this may make it more difficult for him to finance the purchase of a car. This would be an example of a(n) ________ factor that influences his purchasing decision.

economic

Which type of debt would not be forgiven in a straight bankruptcy?

educational loans

The appraised value of your home is the:

estimated current value of the property

What is the most common reason why consumers are unable to pay their bills on time?

excessive use of credit

Payday, cash advance, check advance, and postdated checks are _________ loans.

expensive

Which one of the following is an advantage of renting?

fewer responsibilities

The total dollar amount you pay to use credit is called the:

finance charge

If you have a problem with your credit account, the best solution is to:

first call your creditor

Emily is trying to decide whether to lease or buy a car. Which one of the following is not a factor necessary in making the comparison?

gasoline cost

ncreased consumer spending will usually cause:

higher employment rates

Higher consumer prices are likely to be accompanied by:

higher interest rates

Which of the following is a social factor that would influence a consumer's buying decision?

hobbies

Jennifer Gardner purchases a sofa, love seat and reclining chair for her family room. She made a down payment and will make payments of $65 per month for the next twenty-four months. What type of credit did Jennifer use?

installment sales credit

The changing cost of money when borrowing is referred to as ____________ risk.

interest rates

Refinancing of a mortgage is recommended when

interest rates fall

For a situation to qualify as a class-action suit, it must:

involve several people who have suffered the same problem

In a Chapter 7 bankruptcy, the debtor:

is required to draw up a petition listing all assets and liabilities.

Gary Simpson notices that his neighbor has a brand new Ford F150 truck parked in the driveway. Even though his current car is fine, Gary decides that he needs a new car and goes out and purchases a Tundra with a six-year loan. Which one of the following best explains Gary's spending, which can lead to overindebtedness?

keeping up with the joneses

Which of the following would be an advantage of leasing a vehicle?

lease payments are likely to be lower loan payments

What type of warranty covers only certain aspects of the product, such as parts, or requires the buyer to incur part of the costs for shipping or repairs?

limited warranty

The maximum dollar amount of credit the lender has made available to you is called:

line of credit

Some savings and investment choices have the potential for higher earnings. However, these may also be difficult to convert to cash when you need the funds. This problem refers to:

liquidity risk

Renting is more advantageous than buying a home when you are seeking:

lower initial cost

An advantage credit unions may have over other financial institutions is:

lower loan rates

The process of resolving conflicts between a customer and a business with the use of a third party whose recommendations are nonbinding is called:

mediation

What is the rate an individual will pay to borrow for the purchase of a new home called?

mortgage rate

The purpose of a counteroffer is to:

negotiate the purchase price.

Which of the following is a drawback of a money market fund from an investment company?

not covered by FDIC insurance

Attempts to increase financial resources are part of the ____________ component of financial planning.

obtaining

Gordon Carey uses his Visa card to purchase a new digital camera and lens. What type of credit did Gordon use?

open end credit

Which one of the following financial service providers should be avoided, because the interest rates charged on loans can be over 100% a year?

pawnshop

The purpose of a security deposit is to:

pay for any damages that may occur during the lease period.

If you default on your automobile loan, most automobile financing agreements:

permit your creditor to repossess your car at any time without notice

Prepaid interest charged by a mortgage lender is called:

points

Which one of the following is an advantage of renting?

prefabricated homes

Paula has completed a mortgage application and provided evidence of employment, income, assets owned, and existing debt to the potential lending institution. Although Paula has not even begun the process of looking at possible homes to buy, she is eagerly awaiting news from the lender as to whether she has been approved for a mortgage. In what stage of the application process is she?

prequalification

If creditors give you no credit for payments made during the billing period, then this is called the:

previous balance method

Which of the following expenses is paid from an escrow account?

property taxes

Which one of the following is an advantage of using credit?

providing help in emergencies

Margaret Wilson has a piece of paper that she can mail in to the manufacturer of the product that she just purchased. It allows her to get part of her purchase price back. What is she most likely using?

rebate

This type of savings plan is usually considered to be very liquid:

regular savings account

The main housing costs associated with renting are:

rent and utilities

The best way to maintain your credit standing is to:

repay your debts on time

Pam McNally is planning to use the services of the Better Business Bureau. A major purpose of the BBB is to help:

resolve consumer complaints with local merchants

A loan based on the high equity in a home that provides the homeowner with tax-free income and which is paid back when the home is sold or the homeowner dies is called a:

reverse mortgage

The financial planning process concludes with efforts to:

review and revise your financial plan

What type of account would you expect to provide the poorest yield?

savings account earning 4% compounded annually

A common cost associated with renting is:

security deposit

Chuck Spencer wants to borrow money for six years to purchase a new car. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by:

sharing the interest rate risk

When interest rates are rising, a person should select:

short-term savings interest

If a new-car loan costs 6%, then a used-car loan may cost:

slightly more

When preparing a bank reconciliation, outstanding checks should be

subtracting from the bank statement balance

The success of a financial plan will be determined by:

the individuals financial habits

Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of:

the intended use of a product

An example of a personal opportunity cost would be:

time comparing several brands of personal computers

Opportunity cost refers to:

what a person gives up by making a choice

When did installment credit explode on the American scene?

with the advent of the automobile in the early 1900s