BUSI 1307 Exam 2
Cash and near-cash resources are known as _____. liquid assets illiquid assets non-current assets fixed assets non-cash assets
liquid assets
Higher interest rates on certificates of deposit are associated with: higher account balances. shorter yield curves. longer maturities. smaller deposits. lower effective rates.
longer maturities.
Credit unions are: member-owned financial cooperatives. mortgage lenders. available to the general public. special commercial lenders. not providers of insured deposits.
member-owned financial cooperatives.
If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ as a result of the size of the down payment. closing points a bond mortgage insurance application fees homeowner's insurance
mortgage insurance
An escrow account is used to collect _____ from one's monthly mortgage payment. interest principal real estate taxes closing costs operating expenses
real estate taxes
Low interest rates are helpful in: facilitating a greater supply of money for borrowers. reducing the service cost on the national debt. encouraging a higher savings rate. bringing more investment avenues. improving the standard of living.
reducing the service cost on the national debt.
A(n) _____ is a rented drawer in a bank's vault. safe-deposit box ATM debit card NOW account trust service
safe-deposit box
A real estate sales contract will include: the amount you have paid as an earnest money deposit. the terms of a mortgage loan taken from a third party. deed restrictions. the market value of the property. the current value of the cost of repairs on the house.
the amount you have paid as an earnest money deposit.
The minimum denomination of T-bills is: $100. $500. $1,000. $2,000. $2,500.
$100.
Harry just received $2,000 for graduating. He plans to invest this money for five years at 8%, compounded annually. If he accomplishes this, Harry will have an ending balance of: (Use time value tables or a financial calculator. Select the closest answer.) $2,160. $2,520. $2,608. $2,938. $3162.
$2,938.
The monthly payment on an 8%, 36-month, add-on loan for $10,000 would be: $278 $300. $314. $344. $380.
$344.
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 loan payments do not exceed 35% 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? Monthly Gross Income $4,000 Car payment $350 Student loan payment $200 $1,400 $1,208 $1,208 $850 $500
$850
_____ is a situation where homeowners owe more to lenders than what their properties are worth. A negative equity A foreclosure An adverse rent ratio Inflation A real estate short sale
A negative equity
_____ are the up-front, one-time costs of home ownership. Points Closing costs Property taxes Insurance costs Mortgage interests
Closing costs
Which of the following are tax deductible if one itemizes deductions? Principal, interest, real estate taxes, and insurance Principal, interest, and real estate taxes Principal and interest Interest, real estate taxes, and insurance Interest, insurance, and real estate taxes
Interest, insurance, and real estate taxes
Which of the following is true of buying a used car as compared to a new car? A used car will be in a better mechanical condition compared to a new car. A used car will depreciate at a lower rate compared to a new car. The accessories in a new car will be better updated compared to those fitted in a new car. Purchasing a used car will be less expensive as compared to purchasing a new car. The fuel efficiency in a used car is always higher compared to that of a new car.
Purchasing a used car will be less expensive as compared to purchasing a new car.
Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months. Based on this information, which of the following housing recommendations would be most appropriate for them? Renting a home Buying a condominium Buying a single-family dwelling Buying a cooperative apartment Purchasing a trailer
Renting a home
When shopping for a lease, you want: a high capitalized cost a low capitalized cost. a high money factor. a low residual value. high lease payments
a low capitalized cost.
Which of the following is true of fixed-rate loans? a. Fixed-rate loans are preferable when interest rates are expected to rise. b. The cost of borrowing fixed-rate loans increases with an increase in the market interest rate. c. The cost of borrowing fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable when interest rates are expected to fall. e. The interest rate on fixed-rate-loans have periodic adjustment dates, at which time monthly payments are adjusted.
a. Fixed-rate loans are preferable when interest rates are expected to rise.
_____ loans do not have to be repaid until after you graduate from college. a. Stafford and Perkins b. Stafford and PLUS c. Perkins and PLUS d. PLUS and SLS e. Perkins and SLS
a. Stafford and Perkins
You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to _____ if you report the lost ATM card within 2 business days. $0 $25 $50 $450 $500
$50
A lender will usually require a loan-to-value ratio of _____ or less for you to avoid having to pay private mortgage insurance (PMI). 75% 80% 85% 90% 95%
80%
Funds in commercial banks are protected by the: Financial Deposit Insurance Association. Federal Depositors Assurance Corporation. Federal Deposit Insurance Corporation. Financial Deposit Insurance Corporation. Federal Demand Deposit Corporation.
Federal Deposit Insurance Corporation.
For most homeowners, the most important financial benefit from owning a home is that it is: a security for loans. an inflation hedge a tax shelter. a cash flow item. a psychic income.
a tax shelter.
A(n) _____ is an agency that provides credit information about individual borrowers to lenders. a. credit bureau b. consumer bureau c. insurance company d. bank e. credit scoring house
a. credit bureau
To establish creditworthiness and to have a good credit score, one should probably first: a. open savings and checking accounts. b. use credit extensively. c. arrange for a small loan. d. pay cash for all purchases. e. arrange for a large loan from close relatives.
a. open savings and checking accounts.
When canceling a credit card, you should cut up the card and _____ that you are canceling your account. a. inform the issuer in writing b. call the issuer and tell them c. inform the credit bureau in writing d. call the credit bureau and tell them e. inform the future lender in writing
a. inform the issuer in writing
The most popular use of consumer loans is to: a. purchase a car. b. finance a college education. c. finance a vacation. d. buy a house. e. buy furniture.
a. purchase a car.
With a bank credit card, one can often avoid interest charges if: a. the account balance is paid in full every month. b. at least half the account balance is paid every month. c. the minimum payment is made every month. d. the account is a revolving credit account. e. the account balance is below the credit limit.
a. the account balance is paid in full every month.
Christina works at a company that offers to directly deposit her paycheck into her personal bank account. This service is called: an ATM service. an Federal Deposit Insurance Corporation (FDIC) service. a money market service. an electronic funds transfer system (EFTS) service an overdraft service.
an electronic funds transfer system (EFTS) service
As home prices have fallen in recent years, the rent ratio: and rent affordability have increased. and rent affordability have decreased. has increased and rent affordability has decreased has decreased and rent affordability has increased. has increased and rent affordability has stabilized.
and rent affordability have decreased.
Which of the following sources of consumer loans often has the most favorable terms? a. Commercial banks b. Credit unions c. Consumer finance companies d. Savings and loan associations e. Asset management companies
b. Credit unions
Which of the following is true of installment loans? a. Installment loans require the principal to be repaid in a single payment. b. Installment loans offer the benefit of tax deductibility of the interest paid on them. c. Installment loans are secured using second mortgages only. d. Installment loans are issued by the federal government only. e. Installment loans are a revolving credit line from which consumers can borrow, repay, and reborrow.
b. Installment loans offer the benefit of tax deductibility of the interest paid on them.
Which of the following is true about credit scoring systems? a. Lower scores are better than higher scores. b. Scoring systems are based on statistical studies. c. Credit unions calculate and sell credit scores to lenders. d. Females receive higher scores than males. e. Stronger the personal traits of a person, lower will be his credit score.
b. Scoring systems are based on statistical studies.
Which of the following is a feature of a home equity loan? a. Interest rates on a home equity loan are higher than on other loans. b. The interest paid on a home equity loan is tax deductible. c. A home equity loan is generally the first mortgage loan d. A home equity loan is a single-payment loan. e. A home equity loan is an unsecured loan.
b. The interest paid on a home equity loan is tax deductible.
Credit unions lend money to qualified people who are: a. employees. b. members. c. students d. policyholders. e. stockholders.
b. members.
A single-payment loan: a. is generally unsecured and does not have any collateral. b. usually matures in one year or less. c. usually matures in five to seven years. d. is generally used to finance auto purchases. e. is provided by sales finance companies.
b. usually matures in one year or less.
Jenny's monthly take-home pay is $5,000 and her total monthly payments are $1,000. Which of the following is Jenny's debt safety ratio? a. 10% b. 5% c. 20% d. 35% e. 40%
c. 20%
When the simple interest method is used to determine finance charges, the interest is calculated based on the: a. future value of installments b. average outstanding balance. c. actual balance of the loan. d. present value of all finance charges. e. future value of all finance charges.
c. actual balance of the loan.
Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty. savings account U.S. Treasury bill checking account NOW account certificate of deposit
certificate of deposit
Factors typically influencing the choice of where to maintain a checking account are: convenience, inflation, tax rates, and cost. convenience, inflation, and services. cost, inflation, tax rates, and services. convenience, services, and cost. convenience, services, GDP, and cost.
convenience, services, and cost.
What does a lender look at before granting credit? a. Political interests of the borrower b. Friend circle of the borrower c. Age of the borrower d. Assessment of your creditworthiness e. Lifestyle of the borrower
d. Assessment of your creditworthiness
Interest will usually begin to accrue immediately when you use a bank credit card to: a. make purchases. b. send payments. c. compute finance charges. d. get cash advances. e. meet a financial emergency.
d. get cash advances.
Sometimes it may be better to use one's savings rather than borrowing to make a purchase. This would be recommended when: a. the borrower has adequate savings. b. interest rates are rising c. interest rates are falling. d. the cost of borrowing is greater than the interest earned on the savings. e. the interest earned on savings is greater than the interest paid on the loan.
d. the cost of borrowing is greater than the interest earned on the savings.
Which of the following modes of identity theft involves thieves obtaining your personal information from financial institutions and other sources under false pretenses? a. Dumpster diving b. Skimming c. Phishing d. Pretexting e. Old-fashioned stealing
d. Pretexting
Consumers whose debt burden has become very heavy might apply for a(n): a. personal loan. b. single-payment loan. c. buy-down loan. d. consolidation loan. e. interim financing.
d. consolidation loan.
A legal claim that allows creditors to liquidate a loan collateral is a: a. loan application b. note. c. security claim. d. lien. e. loan rollover.
d. lien.
If the information on your credit report is in dispute, you are entitled to: a. correct it. b. sue. c. erase it. d. provide your own explanation about the dispute. e. withdraw from the credit bureau.
d. provide your own explanation about the dispute.
The loss in the value of an automobile over time is called: maintenance. the loan payment. the sales price. the purchase commission. depreciation.
depreciation.
Which of the following is an appropriate reason for using a credit card? a. Purchase of food b. Payment of utility bills c. Payment of small cash outlays d. Impulse purchases e. Shopping convenience
e. Shopping convenience
The highest interest rate installment loans are usually made by: a. consumer finance companies. b. commercial banks. c. credit unions. d. savings and loan associations. e. life insurance companies.
a. consumer finance companies.
Money market deposit accounts: allow unlimited check writing. are federally insured. have stated maturity dates. are offered only by credit unions. pay the lowest interest rates compared to other bank accounts.
are federally insured.
As a percent of take-home pay, monthly consumer credit payments should not exceed _____. a. 25% b. 20% c. 15% d. 10% e. 5%
b. 20%
Which of the following is an improper use of credit? a. Buying a home b. Buying a short-lived service c. Spreading payments within a budget d. Purchasing a big-ticket item e. Meeting a financial emergency
b. Buying a short-lived service
Which of the following will lead to poor credit rating? a. Opening checking and savings accounts b. Opening and using a charge account c. Applying for a long-term loan and occasionally being late with a payment d. Making payments ahead of scheduled time e. Discussing with the lender if you foresee difficulty in making a payment
c. Applying for a long-term loan and occasionally being late with a payment
Sheldon has a home valued at $108,000 with an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of the market value, how much can Sheldon borrow using a home equity loan? a. $86,400 b. $80,000 c. $38,000 d. $30,400 e. $16,400
e. $16,400
Chapter 7 bankruptcy will: a. restore all the losses incurred by the borrower. b. result in the loss of all of one's assets. c. require the debtor to pay back the debt in the future. d. sell only the home of the borrower. e. eliminate most of the financial obligations of the borrower.
e. eliminate most of the financial obligations of the borrower.
The majority of each monthly payment at the beginning of the loan goes to pay the: principal. interest real estate taxes. homeowner's insurance. private mortgage insurance.
interest
The more frequently a bank compounds interest, _____ will be. the higher the stated interest rate the lower the inflation rate the higher the effective rate the lower the yield rate the higher the normal rate
the higher the effective rate
You are going on an overseas trip, and you want to carry checks. You should purchase: cashier's checks. certified checks. conditional checks. traveler's checks. guaranteed checks.
traveler's checks.
