Personal Finance Exam 2

With low interest rates, savers have begun investing in _____ where higher yields can be found.

Stocks

Paying mortgage points to get a lower rate of interest makes more sense if you expect to live in a home for a ______ period of time

longer

The ______ the period of time you expect to live in a house, the more likely refinancing is a sound financial decision.

longer

If your lender charges 1.5 mortgage points on a house selling for $100,000, on which there is a $90,000 loan, the points will cost you ____.

1,350

Your bank does not levy a service charge on your checking account as long as a $1,000 minimum balance is maintained. Your bank _____ advertise as free checking.

Cannot

Interest rates will be lower on your ____ account.

Checking

The market price for a house is $125,000 and the homebuyer will borrow $100,000. 2 points will equal $2,500.

False

If lenders specify a loan to value ratio of 70%, then a buyer must make a down payment of 70% on the purchase of the home.

False (30%)

The stated interest rate on your account is 7.12% with interest paid semiannually. Your effective rate of interest will be ______ than 7.12%.

Greater

Historically, the primary purpose of savings and loan associations was to

channel savings into mortgages

You have a choice of a 25 year mortgage or a 30 year mortgage. Your monthly payments will be _____ with the 30 year loan.

less

A condominium buyer will make monthly mortgage payments as well as pay a fee for services and maintenance of common areas.

True

A lender will generally require private mortgage insurance (PMI) if the down payment is less than 20%.

True

First time home buyers can withdraw up to $10,000 from an IRA without penalty before age 59 1/2.

True

If your bank states that it compounds monthly, the effective interest rate (APY) will be greater than the nominal interest rate.

True

The total amount of interest you would have to pay would be less with a _____ year mortgage.

shorter