FINANCE CHAPTER 5-6 TEST

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

If your montly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments

$300

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

1.00

Experts usggest that you spend no more than _________________ percent of your net income on credit purhases

20%

The baby boom generation currently represents about 30 percent of the population but holds nearly _________ percent of debt outstanding.

60

Which CD offers a higher rate for every six months that you are invested ?

Bumper-up

A saver will usually earn the highest rate with which one of the following types of savings plans?

Certificate of deposit

What type of account would be considered the most liquid?

Checking account

Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?

Credit Bureau

What is the rate that the Federal Reserve charged banks for loans called ?

Discount rate

Which CD pays earnings based on the stock market ?

Indexed

Which of the following is not a deposit institution?

Life insurance company

Which one of the following savings plans is not covered by federal deposit insurance ?

Money market fund with an investment company

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

Mortgage rate

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

Passbook savings account

Which CD attempts to attract savers with gifts or special rates ?

Promotional

Nate rogers deposited $5000 in a 3 year ban CD which pays six percent interest. What type of financial service is Nate using ?

Savings service

When preparing a bank reconciliation, outstanding checks should be:

Subtracted from the bank statement balance

In the back reconciliation process, service fees should be:

Subtracted from the checkbook balance

The purpose of a "special" endorsement for:

Transfer a check to another person

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

The expedited funds availability act requires that funds be available to depositors:

Within 2 days for local checks

Kathy purchased a $2000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using:

a closed-end credit.

Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of:

a line of credit

A good example of a closed-end credit is:

a mortgage loan

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

annual percentage yield

An all-purpose account that provides several services is an:

asset management account

Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of:

closed-end credit

Traditionally, the greatest variety of financial services is offered by:

commercial banks

The Federal Deposit Insurance Corporation provides deposit insurance for:

commercial banks and savings and loan associations

In recent years membership in credit unions has

continued to increase

Consumer Credit:

dates back to colonial times

The debit card:

debits your account at the moment you buy goods or services

The profits from a mutual savings bank go to the:

depositors

Installment cash credit is a:

direct loan of money for personal purposes

Although credit permits more immediate satisfaction of needs and desires, it:

does not increase total purchasing power

T or F: A regular savings account usually offers a higher rate of return to savers than other savings plans

false

T or F: College students are not a prime target for credit card issuers

false

T or F: In a close-end credit, loans are made on a continuous basis and you make at least partial payment

false

T or F: Most economists do not recognize consumer credit as a major force in the American economy

false

T or F: When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance

false

T or F: With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts

false

By paying cash for a purchase, you:

forgo the opportunity to keep the cash in an interest-bearing account

Another name for closed-end credit is:

installment credit

A certificate of deposit usually has:

limited liquidity

The maximum amount of credit you are allowed by a creditor is called an:

line of credit

installment sales credit is a:

loan that allows you to receive merchandise such as a refrigerator or furniture

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

low-cost personal loans

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

mortgage or rent

Revolving check credit is a:

prearranged loan for a specified amount that you can use by writing a special check

Another name for open-end credit is:

revolving credit

Time deposits are another name for:

savings accounts

A savings account at a credit union is called a ______________ account

shared certificate

Michael purchases a laptop computer from Best Buy. He will make one big payment without paying any interest as long as he pays it on or before August 15. This is an example of:

single lump-sum credit

Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file?

the Fair credit Reporting Act of 1971

A good example of an open-end credit is:

the use of a bank credit card to make a purchase

The purpose of a debit card is to:

transfer money electronically

T or F: "Shopaholics" and young adults are most vulnerable to misusing credit

true

T or F: A "free" checking account with a minimum balance $500 has an opportunity cost of lost interest

true

T or F: A restrictive endorsement will usually include the words "for deposit only"

true

T or F: All-in-one accounts may be used by financial institutions to simplify the maze of financial services and to attract customers

true

T or F: Although credit allows more immediate satisfactory of needs and desires, it does not increase a total purchasing power.

true

T or F: An asset management account combines several financial services for a single fee.

true

T or F: Close-end in credit is used for a specific purpose and involves a specified amount

true

T or F: Consumer credit dates back to colonial time

true

T or F: Consumer credit is based on trust in people's ability and willingness to pay bills when due

true

T or F: Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals.

true

T or F: Credit is an arrangement to receive cash, goods, or services now and pay for them in the future

true

T or F: Credit unions frequently offer lower loan rates than other financial institutions

true

T or F: Credit when effectively used, can help you have more and enjoy more.

true

T or F: In a closed-end credit, generally the seller holds title to the merchandise until the payments have been completed

true

T or F: It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash

true

T or F: Perhaps the greatest disadvantage of using credit is the temptation to overspend

true

T or F: Savings and loan associations offer mortgages

true

T or F: The money market fund offered by investment companies is a relatively liquid financial service

true

T or F: Using a "debit" card is basically the same as writing a check

true

When did installment credit explode on the American scene?

with the advent of the automobile in the early 1900s

The rate of return on a savings account is also referred to as:

yield

If you cosign a loan:

you'll have to pay up to the full amount of the debt if the borrower does not pay


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