Your Money and Credit Exam 2 Cengage Questions

Which of the following is the biggest fixed auto ownership cost? a. The cost of fuel b. The cost of installment loan payments c. The cost of maintenance and repair d. The cost of oil e. The cost of tires

b. The cost of installment loan payments

Credit unions are: a. mortgage lenders. b. member-owned financial cooperatives. c. available to the general public. d. special commercial lenders. e. large institutions when compared with commercial banks.

b. member-owned financial cooperatives

Commercial banks are able to charge lower interest rates than other lending institutions because: a. they make only secured loans. b. they usually take only the best credit risks. c. their depositors require higher rates. d. they get their funds from the money market. e. they make shorter-term loans.

b. they usually take only the best credit risks

Low interest rates that have persisted since the financial crisis of 2008-2009 have been beneficial to: a. share investors. b. savers. c. big banks. d. retirees. e. students.

c. big banks

Jacob has taken an SUV on lease from Free Cruisers Inc. for a period of 4 years. Jacob does not need to pay any extra amount when he turns in the vehicle because he didn't exceed the mileage specified in the lease and the SUV is not damaged. He has a: a. purchase option lease. b. reassignment option lease. c. closed-end lease. d. right to early termination lease. e. residual lease.

c. closed-end lease

Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan. a. a liability b. corporate deposit c. collateral d. insurance e. debt

c. collateral

Which of the following is an aspect of asset management accounts? a. Fixed annual fees and account charges on deposit account b. Borrowing and investing facility unavailable to accountholders c. Limited free checking of available balance d. Deposits protected by the Securities Investor Protection Corporation (SIPC) e. Sweeping of excess balances into money market deposit account (MMDA)

d. Deposits protected by the Securities Investor Protection Corporation (SIPC)

Which of the following are protected by the Federal Deposit Insurance Corporation (FDIC)? a. Life insurance policies b. Money market mutual funds c. Stocks and bonds d. Money market deposit accounts e. Asset management accounts

d. Money market deposit accounts

The price of the car you are leasing is called the: a. money factor. b. purchase option. c. capital cost reduction. d. capitalized cost. e. residual value.

d. capitalized cost

A _____ loan is intended to help consumers who have an unhealthy credit situation caused by overusing their credit. a. personal b. standard c. single-payment d. consolidation e. buy-down

d. consolidation

Credit unions lend money to qualified people who are their: a. employees. b. policyholders. c. suppliers. d. members. e. stockholders.

d. members

To establish credit, you should first: a. arrange for a small loan. b. use credit extensively. c. pay cash for all purchases. d. open savings and checking accounts. e. arrange for a large loan from close relatives.

d. open savings and checking accounts

If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ because of the size of the down payment. a. a bond b. application fees c. homeowner's insurance d. private mortgage insurance e. closing points

d. private mortgage insurance

The most common use of consumer loans is to: a. finance college education. b. buy a house. c. finance a vacation. d. purchase a car. e. buy furniture.

d. purchase a car

If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 80%, then the borrower must make a down payment of at least: a. $180,000. b. $100,000. c. $120,000. d. $80,000. e. $20,000.

e. $20,000

Which of the following is an improper use of credit? a. Buying a home b. Purchasing a big-ticket item c. Spreading payments within a budget d. Meeting a financial emergency e. Buying a short-lived good

e. Buying a short-lived good

Which of the following is an interest-bearing checking account? a. Certificate of deposit b. Treasury bill c. Regular checking account d. Series EE U.S. savings bond e. Negotiable order of withdrawal (NOW) account

e. Negotiable order of withdrawal (NOW) account

The majority of each monthly payment at the beginning of the loan goes to pay the: a. private mortgage insurance. b. real estate taxes. c. homeowner's insurance. d. principal. e. interest.

e. interest

Non-depository institutions are referred to as banks. a. True b. False

b. False

Which of the following statements regarding a consumer loan is true? a. A consumer loan is used to finance the purchase of very expensive items. b. A consumer loan is used chiefly to make repeated purchases of relatively low-cost goods and services. c. A consumer loan provides revolving credit to the consumers. d. A consumer loan provides credit cards and checks to the consumers. e. A consumer loan results from a rather informal process and involves no negotiated contracts.

a. A consumer loan is used to finance the purchase of very expensive items

Which of the following will lead to a poor credit rating? a. Applying for a long-term loan and occasionally being late with a payment b. Making payments ahead of schedule c. Opening and using a charge account d. Discussing with the lender if you foresee difficulty in making a payment e. Opening checking and savings accounts

a. Applying for a long-term loan and occasionally being late with a payment

Which of the following cards provides direct access to your checking account? a. Bank debit cards b. Retail charge cards c. Reward cards d. Affinity cards e. Student credit cards

a. Bank debit cards

Which of the following forms of consumer credit is among the cheapest and offers limited tax deductions? a. Home equity credit lines b. The Wage Earner Plan c. Credit cards d. Unsecured personal credit e. Overdraft protection lines

a. Home equity credit lines

Convenience is a reason for the growth in popularity of: a. Internet banks. b. insurance companies. c. credit unions. d. savings and loan associations. e. mutual savings banks.

a. Internet banks

A certified check is a personal check that a bank certifies to guarantee that the funds are available. a. True b. False

a. True

Lenders use the guideline that a borrower's monthly repayment burden should not be more than 20% of the borrower's take-home income. a. True b. False

a. True

Parent Loans for Undergraduate Students (PLUS) loans are made to the parents or legal guardians rather than to the students. a. True b. False

a. True

Paying a loan on schedule is one way to build a good credit history. a. True b. False

a. True

Prequalification provides a home buyer with information regarding the specific mortgage amounts he or she is eligible for subject to the expected changes in interest rates. a. True b. False

a. True

The frequency of longer-term installment loans carrying variable interest rates is increasing. a. True b. False

a. True

The market price of a house is $125,000, and the home buyer borrows $100,000. Two points are equal to $2,000. a. True b. False

a. True

Mike has a MasterCard with an annual fee of $25, an 18% interest, and a $1,000 credit limit. He always pays the total outstanding balance monthly. His most recent monthly statement lists the previous month's payment, new charges in the current month totaling $1,500, and a $30 fee. The fee is most likely the result of: a. an over-the-limit fee. b. interest charges. c. his annual fee. d. transaction fees on purchases. e. a late payment.

a. an over-the-limit fee

The loss in the value of an automobile that occurs over its period of ownership is called: a. depreciation. b. the repurchase commission. c. the acquisition payment. d. the market price. e. reinsurance.

a. depreciation

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum. a. installment b. standard c. single-payment d. interim e. consolidated

a. installment

Cash and near-cash resources are known as: a. liquid assets. b. fixed assets. c. non-current assets. d. non-cash assets. e. long-lived assets.

a. liquid assets

A foreclosure happens when: a. the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral. b. the value of a house is higher than the loan taken on the property. c. the borrower is planning to restructure the loan taken for making mortgage payments. d. the borrowers repay their housing loan well before the estimated closing period of the loan. e. the rates of interest prevalent in the housing market are extremely volatile, forcing the lender to demand additional collateral from the borrower.

a. the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral

Always paying cash helps in establishing a high level of creditworthiness. a. True b. False

b. False

Cash is the only kind of liquid asset. a. True b. False

b. False

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan. a. True b. False

b. False

Any credit card purchase will effectively be an interest-free loan if you have a zero balance when the grace period begins and you: a. pay for the purchase within 6 months. b. receive a cash advance. c. make the minimum payment. d. pay a $5 fee or 3% of the amount charged. e. pay off the entire balance on or before the due date.

e. pay off the entire balance on or before the due date