Test 2 Personal Finance
The Annual Percentage Yield is the same as the
effective rate
Sales finance companies
buy installment loans from retailers
When reporting errors or unauthorized transactions, it is best to notify your bank
by telephone and follow up with a letter and keep a copy for your files
Before taking out student loans, all the following should be considered except
federal student aid, personal resources, grants, and scholarships
The interest rates and monthly mortgage payments will not change over the life of your mortgage; you have a
fixed-rate mortgage
A single-payment loan is advantageous only if
funds will be available to repay the lump sum
A _____ clause gives the lender legal recourse in collecting the debt if the borrower does not pay.
garnishment
Interest will almost always begin to accrue immediately when you use a bank credit card to
get cash advances
If interest on a savings account is compounded semiannually, the effective rate of interest will be
higher than the nominal rate
Interest rates on _______ are typically lower than on any other form of consumer credit
home equity loans
A check you issued last week has been stolen. You can prevent it from being withdrawn from your account by an unauthorized person by
requesting a stop payment
Persons with very poor credit ratings can still get _______ credit cards
secured
Consumers whose debt burden has become very heavy might apply for a
consolidation loan
The highest interest rate installment loans are usually made by
consumer finance companies
Share draft accounts are commonly offered by
credit unions
One can arrange auto loans through
credit unions, consumer finance companies, auto dealers, and banks
To qualify for a Perkins loan, you must
demonstrate financial need
When an S&L is a mutual association, it means that it is owned by the
depositors
The loss of value in a car over time is called
depreciation
Sheldon has a home valued at $108,000 and an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of market value, how much could Sheldon borrow using a home equity loan?
$16,400
Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college. Assuming he pays interest as in accrues, if Bob dies before the debt is repaid his beneficiary will receive
$225,000
Alice lost her ATM card at the lake and reported it missing the next day. She found that $800 had been withdrawn from her savings account. The most Alice will be legally liable for is
$50
The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12%
12%
Which of the following are important safeguards when using online banking?
128 bit encryption, FDIC insurance, guarantees to protect you against losses, and firewall to protect data
Leasing accounts for about _____ percent of all vehicles sold today.
19
As a percent of take-home pay, monthly consumer credit payment 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
_____ are NOT a type of open credit.
Bank debit cards
At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ________ lease.
Closed-end
Factors typically influencing the choice of where to maintain a checking account are:
Convenience, services, and cost
A _____ is an agency that provides credit information about individual borrowers to lenders.
Credit Bureau
Personal insolvency can be legally satisfied by
relinquishing all credit cards and chapter 7 bankruptcy
Commercial banks are insured by the
Federal Deposit Insurance Corporation
Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following would be least important for them?
Long grace period
A _____ is an interest-bearing checking account.
NOW account
Which of the following are recommended if you loan money to a friend or relative?
Put the agreement in writing
Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months. based on this information, which of the following housing recommendations would be most appropriate for them?
Rent a home
Vicki Vasquez owns a six month treasury bill that is four months from maturity. She recently encountered medical problems and needs the money now
She can sell the T-bill in the open market
_____ loans do not have to be repaid until after you graduate from college
Stafford and Perkins
Regarding student loans, which of the following is true?
There is a limit on how much can be borrowed
You are going on an overseas trip and you want to have checks that are easily converted into local currency. You should purchase
Traveler's checks
When you lease your apartment from the corporation that owns the building and your lease is an ownership share, your apartment is
a cooperative
If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 90%, then the borrower must make
a minimum down payment of $10,000 plus closing costs
The first choice in housing in the United States is
a single-family home
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
Money Market Mutual Funds
allow check writing
Christina works at a company that offers direct deposit of her paycheck. This service is called
an EFT service
The first step in the auto-buying process should be
analyze how much car you can afford
Money Market Deposit Accounts
are typically federally insured
When canceling a credit card, you should cut up the card and _____ that you are canceling your account.
inform issuer in writing
The majority of each monthly payment at the beginning of the loan goes to pay
interest
Appropriate reasons to use credit include
investments, emergencies, durable expenses, and convenience
advantages of buying a used car rather than a new car include
less expensive
A legal claim that allows creditors to liquidate loan collateral is a
lien
It is NOT a good idea to use credit to
live beyond one's means
Most of the reduction in household indebtedness is due to
loan defaults
reasons why auto leasing is so popular include all of the following except:
lower total cost
The quality of your credit rating is maintained by
meeting credit obligations as contracts require
In which of the following situations would you have to pay additional money when returning a vehicle using a closed-end lease?
mileage limits were exceeded
Homeowners may be allowed to deduct the following on their taxes
mortgage interest
A fee charged by lenders as a condition of a mortgage loan that effectively raises the interest rate is called
mortgage points
Credit Unions are
mutual associations
If you borrow money on a single payment loan and discover you cannot pay it back when it is due you should
negotiate a rollover
A financial advantage of renting compared to purchasing housing is
no need for a down payment
The least expensive method for banks to interact with their customers is
online
To establish creditworthiness you probably should first
open savings and checking accounts
A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be
outstanding
The most popular use of consumer loans is to
purchase a car
The seller of the house typically pays the
real estate agent's commission
All of the following are key items lenders look at in granting credit except
religious affiliations
Earnest money is the sum of money the home buyer deposits with the
seller to indicate intent of purchase
Long-term financial goals often depend on borrowing funds. The type of loan that does not fulfill the long-term goal achievement is _____ loans.
single payment
Which of the following is not a strategy to building your nest egg:
splurge once in a while
Chapter 7 bankruptcy will
stay on ones credit record up to 10 years
With an open account credit, one can often avoid interest charges if
the account balance is paid in full every month
Home equity loans are similar to other installment loans except
the interest paid is generally tax deductible
Commercial banks generally charge lower interest rates than other lending institutions because
they usually take only the best credit risks
A monthly credit card statement need not include information about the
type of the goods purchased
Purchasing credit life or disability insurance protection is usually
very costly
Generally, renting would be preferred to buying when
you have no money to make a down payment, you have just gone through a divorce, and you know your job will be temporary