Finance Quizzes for Test 2

The minimum denomination of T-bills is:

$100

Jana has $1,500 for a down payment and thinks she can afford monthly payments of $300. If she can finance a vehicle with a 7 percent, 4-year loan from a credit society, what is the maximum loan amount Jana can afford? (Round off the answer to nearest units place.)

$12,528

If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 80 percent, then the borrower must make a down payment of at least _____

$20,000

The purchase price of the house you are buying is $140,000. A loan-to-value ratio of 80 percent will require a down payment of

$28,000

Jackie is in the 28 percent marginal tax bracket and has no other itemized deductions except those related to her home. If she is eligible for a standard deduction worth $6,100 and she incurs the following costs related to housing, how much tax savings will she receive as a result of her home purchase?

$3,332

You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to _____ if you notify your bank about the lost ATM card within 2-8 business days.

$450

Clare's annual gross salary is $36,000, and her after-tax income is $28,800. What is Clare's maximum recommended monthly consumer credit payment?

$480

Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires that the total installment of loan payments do not exceed 35 percent of the monthly income. Based on Barb and Bob's financial data given below, what is the maximum monthly mortgage payment for which they can qualify?

$850

If you purchase a house worth $110,000 and make a 10 percent down payment, how much would 1 mortgage point cost at closing?

$990

Banks must notify customers _____ days before lowering rates on deposit accounts or certificates of deposit.

30

People who do not have checking accounts often use

A chashier's check

If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 90 percent, then the borrower must make:

A minimum downpayment of $10,000 plus closing costs

_____ is a situation where homeowners owe more to the lenders than what their properties are worth.

A negative equity

A straight bankruptcy _____.

Allows a debtor to retain some other personal assets as per federal regulation

An improper use of extended credit is buying

An expensive dinner

A credit scoring system might assign points according to your age and

Annual income

Which of the following will lead to a poor credit rating?

Applying for a long term loan and occasionally being late on payments

Jane is a college student who withdraws cash at least five times a week to meet her everyday expenses. Jane should have a checking account with good:

Automated teller machine facilities

The financial crisis of 2008-2009 followed by low interest rates have been beneficial to

Borrowers

A financing made available by a builder or seller to a potential new-home buyer at interest rates well below market interest rates, often only for a short period is termed as a

Buydown

It is good to use credit for:

Buying a car

Which of the following is a type of down payment that lowers the potential depreciation and therefore your monthly lease payments on a leased car?

Capital cost reduction

The price of the car you are leasing is called the:

Capitalized cost

Compared to other depository financial institutions, credit unions:

Charge lower rates on loans to their members

A _____ account is called a demand deposit account.

Checking

Jacob has taken an SUV on lease from Free Cruisers Inc. for a period of four years. Jacob does not need to pay any extra amount, based on the residual value of the car, at the end of the fourth year. He has a _____.

Closed-end lease

Share draft accounts are offered by:

Credit unions

Christina's bank allows her employer to directly deposit her paycheck into her personal bank account. This service provided by Christina's bank is called a(n):

Electronic funds transfer system (EFTS)

All credit cards have annual fees.

False

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

False

Credit cards with very low minimum payment requirements are in the consumers' best interest.

False

Credit reports on individual borrowers are provided by credit card issuers.

False

Extremely low interest rates favor investors and boost the incentive to save.

False

Finance charges are computed only on the unpaid balance from previous months' purchases.

False

It is safe and is always necessary to give your Social Security number for identification when using a credit card.

False

Nondepository institutions are referred to as banks.

False

Retail charge cards are cheaper than credit cards provided by financial institutions.

False

The Federal Deposit Insurance Corporation (FDIC) covers stocks, bonds, and mutual funds purchased at banks.

False

The amount of finance charges one pays on a credit card depends only on the annual percentage rate (APR) and the grace period charges.

False

The intent of the Wage Earner Plan is to eliminate all of a debtor's obligations.

False

The key to creditworthiness is to maintain your debt safety ratio at 50 percent or above.

False

In a co-op, the buyer receives title to a unit and joint ownership of the common areas.

False (Quizlet said true if condo)

Janet is considering the purchase of a condo for $150,000 during a recession phase, partly financed by a mortgage. She is due to retire in a few years. If she cannot make her mortgage payments on time, she is bound to incur a

Foreclosure for her house

_____ are loans offering low payments for the first few years, gradually increasing until year three or five, and then remaining fixed.

Graduate-payment mortgages

Low interest rates

Increase the demand for lower-grade riskier bonds

The Federal Housing Administration provides _____ to high loan-to-value ratio mortgages.

Insurance

The majority of each monthly payment at the beginning of the loan goes to pay the:

Interest

Which of the following are tax deductible if one itemizes deductions?

Interest and real estate taxes

Laura has a $100,000 balance in her checking account at Best Bank, and she has purchased a certificate of deposit (CD) worth $50,000 issued by Best Bank. Laura is also thinking of investing $200,000 either in Best Bank or in Trust Bank. Which of the following is a suitable strategy for Laura if she wants her deposits to be completely insured?

Laura should invest $100,000 in a money market deposit account (MMDA) of Best Bank and invest $100,000 in an asset management account of Trust Bank.

The biggest fixed cost of owning a car is likely to be the

Loan payments

A(n) _____ ratio specifies the maximum percentage of the value of a property that a lender is willing to loan.

Loan-to-value

Higher interest rates on certificates of deposit are associated with:

Longer maturities

The _____ department of a bank provides investment and estate planning advice.

Member-owned financial cooperatives

An investor receives the highest interest rate on his or her:

Money market deposit account (MMDA)

Which of the following is an interest-bearing checking account?

Negotiable order of withdrawal (NOW) account

Which of the following is a preferred use of a credit card?

Occasionally for convenience

The first step in establishing a credit history is to

Open checking and savings accounts

A check you wrote to buy shoes last week has not yet been approved by the bank. It is said to be:

Outstanding

Any credit card purchase will effectively be an interest-free loan if you:

Pay off the entire balance on or before the due date

Jane and Smith are considering the purchase of a home in downtown Minneapolis. They approached Larson's Mortgagers Inc. to arrange for the financing needed for their home. This process of arranging with a mortgage lender in advance of buying a home is called _____.

Prequalification

Which of the following is true of phishing?

Pretending to be an employee of a financial institution

Fredrick purchased a property worth $150,000 on mortgage. He had paid $30,000 as a down payment on this property. However, because of a recent slump in the real estate prices, the property is worth only $110,000, forcing Fredrick to sell the property. Assuming that no mortgage payments have been made by Fredrick, this sale is termed a(an) _____.

Real estate short sale

The seller of the house typically pays the

Real-estate agents commission

A bank customer withdraws funds by writing checks from his or her negotiable order of withdrawal (NOW) account and:

Regular checking account

If the information in an individual borrower's credit report is in dispute, he or she is entitled to:

Request a copy of the corrected file

Credit offered in the form of _____ is most common in department and clothing stores and other high-volume outlets, where customers are likely to make several purchases each month.

Retail charge cards

The percentage of _____ out of disposable income has decreased due to low interest rates and has impacted the investment choices of individuals.

Savings

Which of the following savings vehicles is free of state and local income taxes?

Savings bonds

Persons with very poor credit ratings can still get _____ credit cards.

Secured

The interest earned on an individual's _____ is free of state and local income taxes.

Series EE bonds

If you are expecting difficulties in making your payments, it is recommended that you

Talk to the creditors

Which of the following does a lender look at before granting credit to a borrower?

The age of the borrower

Which of the following is a fixed auto ownership cost?

The cost of automobile insurance

The real estate agent's commission is generally paid by

The seller

Which of the following can be excluded from a monthly credit card statement?

The type of goods purchased

Which of the following is true of safe-deposit boxes offered by banks?

They can be used as a storage space for important documents

Which of the following is true of low interest rates?

They encourage investors to search for stocks paying high dividends

A certified check is a personal check that a bank certifies to guarantee that funds are available.

True

Compound interest means that a savings account earns interest on the interest previously earned.

True

Debit cards are very convenient to use as they work like writing a check.

True

For a fee, credit bureaus can provide credit scores of prospective borrowers.

True

Lowballing is a sales technique where the salesperson quotes a low price for a car to get you to make an offer, and negotiates the price upward prior to signing the sales agreement.

True

One can hold a credit card issued by a stock brokerage firm.

True

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

True

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases.

True

Your savings will grow faster with monthly interest compounding than with quarterly interest compounding for a given nominal interest rate.

True

The ____ department of a bank provides investment and estate planning advice.

Trust services

As home prices have fallen in recent years, the rent ratio:

and rent attractiveness have decreased

Money market deposit accounts:

are federally insured

Which of the following statements is true about the cash advances that the holder of a bank credit card can obtain from participating banks?

cash advances obtained from the teller window at a bank are limited by the unused credit in the borrower's account.

The data in a multiple listing service (MLS):

consists of a comprehensive listing of properties for sale in a given community area.

You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You have

experienced a negative amortization

Variable auto ownership costs are dependent on:

miles covered by the automobile

To establish creditworthiness and to have a good credit score, one should probably first:

open savings and checking accounts

_____ are ongoing costs of home ownership.

property taxes and insurance

Earnest money is the sum of money the home buyer pledges with the

seller to indicate intent of purchase

With a bank credit card, one can often avoid interest charges if:

the account balance is paid in full every month

The more frequently a bank compounds interest, _____ for a given nominal rate will be.

the higher the effective rate

Which of the following is the correct expression for calculating the debt safety ratio?

total monthly consumer credit payment / Monthly take-home pay

Assume that you have taken a car on a closed-end lease for a period of 5 years. At the end of the fifth year, you would need to pay additional money only

when the milage limits are exceeded