Finance exam 2
an example of an open account credit would be a bank:
credit card
____ is a loss of the value of a asset such as an automobile that occurs over the period of ownership
depreciation
consolidation loans are generally:
expensive
the key to credit worthiness is to keep your debt safety ratio as high as possible
false
using credit is the ideal way to provide for financial emergencies
false
you can stop payment when you purchase an item with your debit card
false
commercial banks are insured by FDIC, what does FDIC stand for
federal deposit insurance corporation
credit unions are more likely to be paying _____ interest on accounts than a commercial bank
higher
the decision whether or not to grant you credit will be made by
individual creditors
home owners may be able to deduct ___ from taxes
interest
having some type of overdraft protection with your bank will end up costing more or less than having a check bounce
less
it would make sense to purchase a vehicle at end of a close ended lease if the car is more or less in value
less
____is another term for landlord
lessor
credit unions are:
member owned financial corporatives
a person who pays of their credit balance every month should look for a credit card with
no annual fee
an improper use of extended credit would be to buy
non-durable goods
the most popular use of consumer loans is to do what:
purchase a car
borrowing from relatives is
seldom
to establish credit worthiness, you should first do what:
start a checking and savings account
the best loan rates for consumer loans are usually from
the consumer finance companies
sometimes it may be better to use savings rather than borrowing to make a purchase, this would be recommended when:
the cost of borrowing is greater than the interest earned on the savings
most creditors will or will not be willingly to work something out with you if you're having difficulty meeting your payments
they will
a close ended automobile lease is the most popular type of lease
true
a loan to value ratio of 80% would require a buyer to make a 20% downpayment
true
as a homeowner, the federal government may allow you to deduct interest expenses and taxes paid on property
true
automobile tend to decrease in value overtime
true
banks credit card cash advances will begin accruing interest charges immediately
true
collateral is an item of value used to secure the principle portion of a loan
true
consumer loans are most commonly used to obtain durable goods
true
credit union members are expected to have some common bond
true
credit unions grant loans only to members of the credit union
true
having a range and fully repaid a small loan should help improve your credit readiness
true
one could expect to earn a higher rate of interest on a certificate of a deposit than on a checking account
true
the FDIC insures depositors funds up to 250,000 at member banks under the same depositors name
true
the largest single investment you will undertake in your lifetime will probably be the purchase of a home
true
the purpose of a credit report is to evaluate the kind of risk you pose to the lender
true
when buying a used car have it checked out by a mechanic
true
5 C's of credit
- Character: borrowers willingness to live up to the terms of the loan - Capacity: ability of the Borrower to service the loan in a timely fashion. - Collateral: Something of value that's used to secure a loan and that the lender can claim in case of default - Capital: The amount of assets owned by the borrower used as another indicator of ability to repay the loan - Condition: economic conditions that could affect the borrower's ability to service a loan
as a percentage of your take home pay, monthly consumer credit payments should not exceed what percentage:
20%
an important rule for establishing a savings plan is to what:
all the above
researching used car prices, you can check one of the popular car guides:
all the above
the first step in the auto buying process should be:
analyze how much you can spend on the car
low interest rates that have persisted since the financial crisis have been a net benefit to
borrowers
an investor would typically expect to receive higher interest rates on
certificate of deposit
a checking or savings account is called a demand deposit account
checking
with a close ended or open ended lease you turn in the car at the end of the term and have no additional financial obligations
close ended