Personal Finance Exam 2

Identity theft occurs when an individual obtains, without your permission, all of the following information EXCEPT a. drivers license number b. Social Security number c. date and place of birth d. bank account number

date and place of birth

The impact of credit _______ saving and _________ spending a. Credit has no relationship on saving and spending b. decreases; decreases c. decreases; increases d. increases; decreases

decreases; increases

The first step in the home-buying process should be to a. determine a realistic price range of homes you can afford b. compare the cost of buying to renting c. find a good realtor d. identify the specific home you want to purchase

determine a realistic price range of homes you can afford

Collateral a. increases the interest rate on loans b. gives the lender additional recourse if the payments are not made c. is used on unsecured loans d. is required on all loans

gives the lender additional recourse if the payments are not made

Creditors prefer a _______ amount of capital and _________ collateral in the best of circumstances a. medium; low b. high; low c. low; low d. high; high

high; high

Advantages of using credit are all of the following EXCEPT a. convenience in making day-to-day transactions b. increases the number of checks written c. the ability to buy large items earlier d. the ability to cover cash flow shortages

increases the number of checks written

Over the life of a loan, the payment to principal ________ and the portion to interest expense _______ a. decreases; increases b. decreases; decreases c. increases; increases d. increases; decreases

increases; decreases

Of the following statements, which is NOT a disadvantage of using credit a. it can be costly to use b. it is more difficult to obtain than repay c. it may tempt you to make impulse purchases d. it can be difficult to repay if overused

it is more difficult to obtain than repay

When considering how much money to spend on a new car, you must consider how your choices affect your spending on other needs. The _______ solution limits your purchases to what you can afford pay off when your credit card bill arrives each month a. limited debt b. no debt c. maximum debt d. minimum debt

limited debt

The document that specifies the term of a loan as agreed to by the borrower and lender is called the a. loan repayment schedule b. terms of agreement c. loan application d. loan contract

loan contract

Credit cards are generally used for such purchases as a. stocks b. cars c. meals, clothing, and groceries d. homes

meals, clothing, and groceries

Credit card companies' fees cannot exceed ______ of the initial credit limit a. more than 10% b. more than 25% c. more than 5% d. more than 50%

more than 25%

To determine how much home you can afford to purchase, you should NOT consider a. finding a good internet page that has a mortgage calculator b. possible future raises you will receive c. looking at your budget, balance sheet, and income statement d. consulting a loan officer

possible future raises you will receive

Owning a home entails all of the following expenses EXCEPT a. lost interest on down payment and closing costs b. maintenance expenses c. renter's insurance d. property taxes

renter's insurance

All of the following illustrate lessons learned regarding the 2008-2009 financial crisis EXCEPT a. housing conditions have a strong impact on the economy b. economic conditions affect the demand c. allowing unqualified mortgage applicants to qualify for mortgages hurt the housing market d. sellers were able to attract potential buyers by slightly reducing sale prices

sellers were able to attract potential buyers by slightly reducing sale prices

When accessing the condition of a used car, you should carefully consider all of the following EXCEPT a. the history of routine maintenance b. the insurance premium the previous owner paid c. the condition of the interior d. the condition of the exterior

the insurance premium the previous owner paid

When making purchases on line, you can take all of the following steps to recognize and avoid identity theft EXCEPT a. don't download files sent to you by strangers b. use a secure browser c. use your cell phone to place credit card orders d. read the privacy policies of the web sites you want

use your cell phone to place credit card orders

A credit card whose interest rate changes as a specific market interest rate changes is said to have a a. constant rate b. variable rate c. fixed rate d. tiered rate

variable rate

The minimum credit score required by financial institutions a. is 600 b. is 550 c. is 500 d. varies by institution

varies by institution

Which credit card requires full payment each month? a. A proprietary card b. American Express c. Visa d. MasterCard

American Express

Which of the following items would a personal loan be a better option than a credit card for a college student? a. Tickets to sporting events b. Car maintenance expense c. Trips home for the holidays d. Tuition and dorm fees

Tuition and dorm fees

A 15 year mortgage compared to a 30 year mortgage has all of the following EXCEPT a. a faster build up of equity b. a lower appraisal fee c. higher payments d. less interest over the life of the loan

a lower appraisal fee

A mortgage where the interest owed changes in response to movements in a specific market-determined interest rate is called a(n) a. adjustable rate mortgage b. HELOC c. fixed-rate mortgage d. second mortgage

adjustable rate mortgage

Which of the following is the most common source of financing for personal loans? a. Sales finance companies b. Financial institutions c. Credit cards d. Family and friends

Financial institutions

In applying for a credit card, the potential creditor will look at which of the following as a source of future debt payments if necessary? a. Credit history b. Potential inheritances c. Balance in savings accounts d. Cash outflows

Balance in savings accounts

Of the following statements, which is NOT an advantage of using credit? a. Buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems b. Credit cards permit the purchase of goods even when cash funds are low c. Using credit is safe since charge accounts and credit cards let you shop and travel without carrying large amounts of cash d. Credit creates stability and allows you to establish a favorable credit history

Buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems

Which of the following will NOT protect you from identity theft while on vacation? a. Do not leave sensitive information in your hotel room when you are not there b. Have your mail stopped c. Carry all credit cards, passports, and birth certificates with you d. Do not have credit slips in restaurants

Carry all credit cards, passports, and birth certificates with you

In negotiating for the purchase of a home, which of the following may NOT be included? a. Cost of street repairs b. A pile of wood for the fireplace c. Possession date d. Repairs that are able to be made

Cost of street repairs

Which of the following statements is true regarding non-installment credit? a. The borrower has a longer time to repay b. Credit is usually issued for 30 days or less c. The borrower has an unlimited amount of credit d. Monthly payments of principal and interest must be paid

Credit is usually issued for 30 days or less

The loan contract identifies all but which of the following? a. Loan repayment schedule b. Credit score c. Amount of the loan d. Interest rate

Credit score

Which of the following is NOT a method by which financial institutions calculate finance charges on credit cards? a. Adjusted balance method b. Average daily balance method c. Ending balance method d. Previous balance method

Ending balance method

Which of the following statements about interest-only mortgages is NOT true? a. Mortgage payments may increase abruptly b. Interest-only mortgages allow the borrower to pay only interest for the life of the mortgage c. Interest-only mortgages have become more popular in recent years d. Mortgage payments are more affordable

Interest-only mortgages allow the borrow to pay only interest for the life of the mortgage

Which of the following is true about condominiums? a. All of these b. Maintenance fees of common areas are shared c. Each person owns a portion of the land on which a condominium is located d. They have more privacy than single family homes

Maintenance fees of common areas are shared

Which of the following methods of calculating finance charges on credit cards is least favorable to the cardholder? a. Ending balance method b. Previous balance method c. Adjusted balance method d. Average daily balance method

Previous balance method

When purchasing a home, which of the following costs will you NOT incur? a. Application fees b. Appraisal fee c. Realtor's commission d. Origination fee

Realtor's commission