Personal Finance Exam #2: Chapters 4-6 Review

The Truth in Savings Act requires financial institutions to disclose the ___________________ on savings accounts.

Annual Percentage Yield (APY)

An all-in-one account that provides a complete financial services program for a single fee is known as:

Asset management account

Which type of financial institution offers a full range of financial services including checking, savings, lending, and other services?

Commercial Bank

Researching the brands and prices of refrigerators is called:

Comparison-Shopping

Earning interest on previously earned interest is called:

Compounding Interest

A credit card holder who pays off his balances in full each month is known as:

Convenience Users

Purchasing a car so a homemaker can return to work, Borrowing for a college education, Purchasing an item that costs less now than it will later, and Paying for a medical emergency are all valid reasons for using:

Credit

Examples of open-end credit:

Credit Cards, Store Credit Cards, Bank Credit Cards, overdraft protection

Examples of closed-end credit:

Mortgage loans, automobile loans, and installment loans for big purchases (one-time purchases)

John needed some cash quickly, so he received a short-term loan based on the proportional value of an old ring. Where did he go?

Pawn Shop

What type of contract covers the repair costs of a product

Service Contract

If you have a problem in which the remedy will be between $1,500 and $3,000, the appropriate tool to use would be a:

Small Claims Courts

If a check is lost or stolen, you should use a:

Stop-payment order

The greatest disadvantage of using credit is:

Temptation to overspend

Impulse shopping is:

Unplanned purchasing, which can result in financial problems

What is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired?

Warranty

What is Collateral?

is a valuable asset that is pledged to ensure loan payments

What is Capacity?

is the borrower's ability to pay additional debts

What is Capital?

is the borrower's assets or net worth

What is the unit price of a 22.4-ounce box of brown sugar that costs $13.44

$0.60 per ounce

Karen received a $1,060 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 8.25 percent loan. What is her total interest?

$1,060 x .0825 = $87.45 in Total Interest

Chris received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8 percent loan. What is his total interest?

$112 of interest per year, $224 for the entire loan.

If Vince charged $270 on his credit card with 21 percent APR and he paid his balance in full within the grace period, how much was he required to pay?

$270 since he paid during the grace period, he would have to pay $56.70 in fees if it was outside of the grace period. You do not have to pay additional interest in the grace period.

Peter borrowed $360 to be repaid in one year. He paid 10 percent interest and a service charge of $19. What is his finance charge?

$36+19= $55 in Finance Charges

If you think your identity has been stolen, which action does the Federal Trade Commission recommend you take immediately?

1. Contact the Credit Bureaus 2. Contact the Creditors 3. File a police report

What are the four major factors when considering a financial services provider?

1. Convenience 2. Fee Structure and other Charges 3. Personal Service 4. Rates for Savings and Borrowed Funds

Southern Home Lending offers home equity loans up to 80 percent of the home value for its customers. If Sue Jones has a home valued at $290,000 and a current mortgage of $87,000, how much can she borrow in a home equity loan from Acme?

290,000 x .08= $232,000 - 87,000 (Remaining Balance) =$145,000

What is the APY for a savings account with a $250 balance that receives $9 interest for the year?

3.6% = 9/250

What is the APY for a one-year $4,000 certificate of deposit with $280 interest?

7% = (($4280/4000)-1) x 100 APY=(PA​)1/n−1 Where: �A is the ending balance (including interest) after one year. �P is the initial principal balance. �n is the number of compounding periods in one year.

What are the advantages and disadvantages of leasing a car VS. buying a car.

Advantages of Leasing a Car vs Buying a Car: o Only requires a small cash outflow at time of purchase, then requiring a large cash outflow when buying a car. o Monthly lease payments are generally lower than monthly financing payments (buying) o A lease provides detailed records for business purposes o You are able to obtain a more expensive vehicle than buying. · Disadvantages of Leasing a Car vs Buying a Car: o Leasing gives no ownership interest in the vehicle o To lease, you must meet requirements similar to qualifying for credit o Additional costs may be incurred when leasing like extra mileage, certain repairs, turning the car in early, or even moving to another state

Where is the most expensive place to get a car repaired?

Car Dealerships

Laura bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a:

Certified Check

What are the 5 C's of Credit and what does each one mean?

Character, capacity, capital, collateral, and conditions

Lee wants his retail purchases to be deducted directly from his checking account. What should he use?

Debit Card

Most customer complaints result from:

Defective products, low quality, or short product lives, unexpected costs, deceptive pricing, and poor repairs.

Jack borrowed $225. He paid $20 interest and a service charge of $3.00. What is his finance charge?

Finance Charge of $23

The periodic charge for the use of credit is called:

Interest

What is a drawback of a regular savings account?

Low interest/ low rate of return

What are the techniques to get the best deal on a car purchase?

Top Three: Research, Negotiate, and Read the fine print

A credit card is a type of:

a type of loan/borrowing

What are conditions?

affect a borrower's ability to repay a loan

What is Character?

refers to the borrower's attitude towards his or her credit obligations

If you miss payments on a home equity loan:

the lender can take your home.