FIN 1010 Chapters 1, 3, 5-9

Patricia McDonald has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500 and owes $7,800 on her auto loan. She has also purchased some stock worth $5,500 and she has a retirement account worth $38,550. What is the total value of her assets?

$171,900

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is the total value of her assets?

$267,500

During the past month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were:

$3,200

An online buying club requires an annual fee of $60 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?

$400

Natasha and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction may reduce their taxable income by:

$8,000.

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her real estate assets?

$98,000

A person has $1,250 in liabilities, monthly savings of $200, and monthly gross income of $2,500. What is the person's savings ratio?

0.08

Affan Chawdry has monthly net income of $1,050. He has a house payment of $450 per month, a car loan with payments of $250 per month, a Visa card with payments of $50 per month, and a credit card with a local department store with payments of $100 per month. What is Affan's debt payments-to-income ratio?

0.81

If closing costs of $1,400 are associated with the refinance of a mortgage that would reduce the monthly payment from $980 to $870, it would take approximately ____ months to cover these costs.

13

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

20

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 executed.

22

According to Fair Isaac Corporation (FICO), a personal bankruptcy can cause an immediate drop in your credit score of how many points?

260

When you complain about your billing error, the creditor must acknowledge your letter within ____________ days.

30

With an inflation rate of 9 percent, prices would double in about ___________ years.

8

Paul Carter is 43 years old, married and has three children, ages 13, 10 and 5. Which influence on financial planning does this demonstrate?

Adult Life Cycle

A newly married couple is having trouble affording a home. What type of mortgage arrangement would reduce the monthly payment as a result of an interest rate subsidy from a builder or real estate developer?

Buy-down

Gary Smith is purchasing one living unit in a building. What type of housing is Gary most likely going to live in?

Condominium

Which of the following is usually the largest fixed expense for a new vehicle?

Depreciation

The Consumer Credit Counseling Service (CCCS) is affiliated with the:

National Foundation for Consumer Credit.

Financial planning has specific techniques that will be effective for every individual and household.

False

If creditors give you no credit for payments made during the billing period, it is called the adjusted balance method.

False

Present value is also referred to as compounding.

False

Real estate advisors suggest a price-to-rent ratio of 25 or lower when you buy to possibly avoid lower home value after your purchase.

False

You can deduct interest paid on consumer loans for state and federal income tax returns.

False

Which one of the following is an advantage of renting?

Fewer responsibilities

Analyzing your current financial position is a part of which step in the financial planning process?

First

Jim Roy visits the doctor for his annual check-up which costs $85. He is billed for this at the end of the month. What type of credit did Jim use?

Incidental credit

John Gleason is interested in purchasing a 46" rear projection TV for his living room. He knows that right now the TV will cost approximately $1500. However, John is a little concerned about his job. John is a pilot for Delta Airlines and he thinks it is possible that he could be laid off in the near future. What type of risk is John worried about?

Income risk

Which type of financial records includes stock and bond reports?

Investment

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

Which of the following would be considered a fixed expense?

Mortgage payment

Which one of the following financial service providers should be avoided because the loans they offer are considered expensive and high-risk?

Pawn shop

Which one of these situations creates negative amortization?

Paying less than the monthly interest on a mortgage

Neil Guest writes a check to pay for day care for his son. What type of financial service is Neil using?

Payment service

Developing and using a budget is part of which component of financial planning?

Planning

Damian Walker just purchased a new vehicle. He is reading his owner's manual to know when he needs to take it in for its regular servicing at the dealer. He wants to make sure this car lasts a while. What step in the purchasing process is Damian carrying out?

Post purchase activities

Which of the following financial documents would most likely be stored in a safe-deposit box?

Savings certificates

Which of the following would be an example of a personal and employment document?

Social Security card

Which formula dictates that you pay more interest at the beginning of the loan and pay less and less interest as the debt is reduced?

The rule of 78s

"Shopaholics" and young adults are most vulnerable to misusing credit.

True

A class action suit allows many people with the same complaint to take action as a group.

True

Advertising is a type of consumer information commonly provided by business organizations.

True

An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.

True

An asset management account combines several financial services for a single fee.

True

Analyzing your current financial position is a part of the first stage of the financial planning process.

True

Closed-end in credit is used for a specific purpose and involves a specified amount.

True

Consumer credit is based on trust in people's ability and willingness to pay bills when due.

True

Discretionary income is money left over after paying for housing, food, and other necessities.

True

For some debtors, bankruptcy has become an acceptable tool of credit management.

True

If someone has stolen your identity, the Federal Trade Commission recommends that you contact the fraud departments of each of the three major credit bureaus.

True

In a straight bankruptcy, many, but not all, debts are forgiven.

True

Installment cash credit is a direct loan of money for personal purposes, home improvements, or vacation expenses.

True

Parents or family members are often the source of the least expensive loans.

True

Savings and loan associations offer mortgages.

True

Several federal government agencies publish materials to assist consumers with buying decisions and financial planning.

True

The aging of the baby boom generation has added to the growth of consumer credit.

True

The most commonly purchased type of credit insurance is credit life insurance.

True

With closed-end credit, generally the seller holds the title to the merchandise until the payments have been completed.

True

You may be able to borrow at a lower interest rate if you accept a shorter-term loan.

True

You may not be denied credit because you receive Social Security or public assistance.

True

Which of the following is an effective strategy in times of falling interest rates?

Use short-term loans to take advantage of lower rates when you refinance the loans.

What type of warranty indicates that the seller has the right to sell a product?

Warranty of title

A possible disadvantage of FHA and VA mortgages can be:

a longer processing time.

The main goal of personal financial planning is:

achieving personal economic satisfaction.

Kyle Burroughs has decided to put $25 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his savings is important. This would be an example of:

an opportunity cost.

The first step of the financial planning process is to:

analyze your current personal and financial situation.

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

annual percentage yield.

The price that is paid for a vehicle in a lease is called the:

capitalized cost.

A personal check with guaranteed payment is called a:

certified check.

You can often obtain medium-priced loans from:

commercial banks and credit unions.

The Federal Deposit Insurance Corporation provides deposit insurance for:

commercial banks and savings and loan associations.

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

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

Savings compounded ____________ would have the highest effective yield.

daily

The profits from a mutual savings bank go to the:

depositors.

Sources for financial planning can be found from:

digital sources, financial institutions, financial experts, print and media

Planning to buy a house is an example of an intangible goal.

false

When it comes to savings, most Americans:

find saving difficult

Higher prices are likely to result from:

increased spending by consumers without increased production.

An example of an economic buying influence would be:

inflation.

Refinancing of a mortgage is recommended when:

interest rates fall.

A disadvantage of leasing an automobile would be the:

limited mileage in the lease agreement.

A trust has the purpose of:

managing the assets of a person.

In determining your credit capacity, you first provide for basic necessities, such as:

mortgage or rent.

A vehicle sold "as is" has:

no express warranty.

According to consumer affairs experts, the nation's number one family financial problem is:

over-indebtedness.

The purpose of a security deposit is to:

pay for potential damages.

A personal balance sheet:

reports what an individual or a family owes and owns.

A limit on the amount you must keep on deposit in order to earn interest or avoid a service charge is an example of a(n):

restriction.

Another name for open-end credit is:

revolving credit.

The uncertainty associated with decision making is referred to as:

risk

Purchasing a new CD upon maturity of the current CD is commonly referred to as:

rolling over.

A home equity loan may also be referred to as a ____________ mortgage.

second

Frank West wants to borrow money for three years to purchase a new boat. 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.

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

solve your problem directly with the creditor.

The items produced for a single retail chain are commonly sold under a ____________ brand.

store

This month, Ken Grossman has cash inflows of $3,100 and cash outflows of $2,950, resulting in a

surplus of $150.

Total earnings of a person minus the deductions for taxes and other items is called:

take-home pay

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.

If you have a complaint about consumer credit, you should first:

try to solve your problem directly with the creditor.

The Expedited Funds Availability Act requires that funds be available to depositors:

within 2 days for local checks.