Business 121: Exam 2 - Ch 4, 5, 6, 7
Cathy wanted to buy some investments. To which of the following should she go?
Commercial bank
In which of the following are most of the investments insured?
Commercial bank
When you select a financial service provider, you may find all of the following to be major factors except
Company logo
A time deposit is also known as
A saving account
Buy Down
An interest rate subsidy from a home builder or a real estate developer purchased by the buyer that reduces a home buyer's mortgage payments during the first few years of the loan.
Steve bought a laptop that was defective. This laptop will be fixed or replaced by the manufacturer as long as he returns it in a reasonable amount of time. What type of warranty does he have on his laptop?
Full warranty
Which of the following costs will directly increase with the number of miles driven?
Gasoline
lifestyle
How you spend your time and money - may seem intangible, it materializes in the consumer purchases you make
Fair Credit Reporting Act (1979)
Law requires out of date information to be deleted Gives consumer access and the ability to correct misinformation
Steven needs to write a will. His best resource is (a)
Lawyer
A legal document that includes information about the due date of monthly rent is called a
Lease
Cost of Credit and Expected inflation
Lenders incorporate the expected rate of inflation when deciding how much interest to charge
finance companies
Provide loans to consumers and small businesses. These loans have a short and intermediate terms with higher rates than most other lenders charge. Most finance companies also offer other financial planning services.
A reverse mortgage
Provides older homeowners a loan that pays tax-free income and is repaid when the home is sold
Which of the following is a valid reason for borrowing?
Purchasing a new dishwasher, Borrowing for a college education, Purchasing a home, and Paying for a medical emergency
Earnings on savings can be measured by the
Rate of return
Which of the following is an advantage of renting?
Renters have fewer responsibilities than homeowners
Credit Card Accountability Responsibility and disclosure act of 2009 (card act)
This act became effective in Feb. 2010. Credit card Co. must provide 45 days notice of rate increases.
Anders went to Norway and went shopping. He had to sign his name a second time on this document at the store. Anders used a
Traveler's check
Consumer Credit
Use of credit by individuals for personal needs, except a home mortgage A major force in our economy
conventional mortgage
Usually has equal payments over 15, 20, 30 years based on a fixed interest rate
regular checking account
Usually have a monthly service charge that you may avoid by keeping a minimum balance in the account.
regular savings account
Usually involve a low or no minimum balance and allow you to withdraw money as needed. Also called passbook or statement accounts. At credit unions these accounts are called share accounts.
interest-earning account
Usually requires a minimum balance. If the account balance goes below this amount, you may not earn interest and will likely incur a service charge. These are called share draft accounts at credit unions.
Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?
VantageScore
This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired.
Warranty
If you are denied credit,
You are entitled to a free copy of your credit report
Common Endorsements
(1) Blank endorsement, (2) restrictive endorsement, (3) special endorsement
Deposit institutions are:
Commercial banks, savings and loan associations (S&Ls), mutual savings banks, credit unions
A credit report includes
Credit history
A process used to settle grievances using a nonbinding process is called a(n)
Mediation
Implied Warranty of Title
indicates that the seller has the right to sell the product.
straight bankruptcy
many, but not all debt is forgiven.
Zero-coupon CD
purchased at a deep discount with no interest payments
Given the information below, what should Jason's adjusted bank balance for his bank reconciliation be? Bank balance: $250 Outstanding checks: $79 Deposit in transit: $25 ATM Fees: $6 Interest earned: $1 Checkbook balance: $201
$196
Neil invested $10,000 in a certificate of deposit earning 12% per year. Unfortunately, he needed to withdraw it before the maturity date. If the penalty involved two months of interest, what was his total penalty?
$200
Suppose you borrow $200 for one year and pay a finance charge of $20. If you repay this loan all at once after one year, what is your average balance?
$200
Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 45 days. What is the most that he liable for?
$238
The FDIC temporarily increased its coverage in October 2008 to _______ per depositor.
$250,000
Paul borrowed $250 to be repaid in one year. He paid 10 percent interest and a service charge of $2.50. What is his finance charge?
$27.50
Peter borrowed $250. He paid $25 interest and a service charge of $2.50. What is his finance charge?
$27.50
If Vinay charged $300 on his credit card with 18 percent APR and he paid his balance in full within the grace period, how much was he required to pay?
$300.00
Evan had three accounts as listed below. In 2009, how much was his total coverage by the FDIC? Bank A: $100,000 Bank B: $75,000 Bank C: $300,000
$425,000
Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?
$50
Gwen had three accounts as listed below. In 2009, how much was a total coverage by the FDIC? Bank A: $275,000 Bank B: $25,000 Bank C: $350,000
$525,000
Tanya received a $1,000 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 7 percent loan. What is her total interest?
$70
real estate agent services
(1) showing you homes to meet your needs (2) presenting your offer to the seller based on a market analysis (3) negotiating a settlement price (4) assisting you in obtaining financing (5) representing you at closing
Nicholas earned 10% in his savings account. If he is in the 25% tax bracket, what is his after-tax savings rate of return?
7.5%
Automatic Teller Machine (ATM)
A computer terminal used to conduct banking transactions; also called a cash machine
reverse mortgages
A loan used by qualified homeowners age 62 or older to convert equity in the home into a lump sum, a monthly stream, and/or a line of credit; generally repaid when the last surviving borrower dies, sells the home or ceases to live in the home for 12 consecutive months. (also called home equity conversion mortgages)
Donald wanted to buy a house in the country, so he sought the advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he did have some information incorrect. Which of the following is incorrect?
An advantage is that the down payment required is less than the security deposit for a rental.
Assest Management Account
An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called cash management account
cash management account
An all-in-one account that provides a complete financial services program for a single fee is known as Asset management account
condominium
An individually owned housing unit in a building with several such units
ATM stands for
Automatic teller machine
Installment credit exploded on the American scene with the advent of the
Automobile
Nora bought a used car and was told that she needed a check with guaranteed payment. She obtained a
Certified check
The question "will you repay the loan?" relates to
Character
The Five Cs of Credit
Character - Will you repay the loan? Capacity - Can you repay the loan? Capital - What are your assets and net worth? Collateral Condition
demand deposits
Checking accounts and other payment methods
Sally has a major problem with a product and thinks that many others have had the same problem. Which of the following is the best way to resolve the problem?
Class-action lawsuit
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Created the CFPB, with the purpose of educating consumers, enforcing federal consumer laws, and gathering and analyzing information to lead to a better understanding of consumers financial services providers and markets.
All of the following are consumer credit protection laws except
Credit Lawsuit Act
Borrowing
Credit alternatives range from short-term accounts, such as credit cards and cash loans, to long-term borrowing, such as a home mortgage
Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work?
Credit card company
Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?
Debit card
Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
Debit card
Aidan wants to be able to complete his payment transactions electronically. Which of the following tools should he use?
Debit card, Online payment, Stored-value card, and Smart card
If you want to file a complaint against a bank, you:
Do not need to have an account at the bank
All of the following are deposit institutions except
Finance company
Federal Housing Authority (FHA)
Government agency designed to make buying a home more affordable. Insured loans made by banks and other private lenders for home building and home buying.
If you have a mortgage that provides for increases in payments that allow the amount owed to be paid off more quickly, you have a(n)
Growing-equity mortgage
Home equity loans
Have interest that is tax-deductible
Credit reports can be obtained for all except:
Inquiry by a neighbor
blank endorsement
Is just your signature, which should be used only when you are actually depositing or cashing a check, since a check my be cashed by anyone once it has been signed.
Deposit Ticket
Is used for adding funds to your checking account.
Car Title Loan Companies
Is when an automobile title is used as security for a high-interest loan. Usually due in 30 days, similar to payday loans and often exceeds 200 percent.
Which of the following is correct about the lemon law?
It applies to vehicles that have been serviced four times to correct the same problem in the first 12,000 miles.
stop payment order
May be necessary if a check is lost or stolen. There may be a $20 to more than $30 fee to stop check.
Kylie went to a post office to obtain a
Money order
Travel and Entertainment Cards
Not really credit cards, balance is due in full each month
Liquid CDs
Offer an opportunity to withdraw money without a penalty. However, you will likely be required to maintain a minimum balance in the account. This type of CD may have other restrictions such as a "waiting period" before any funds can be withdrawn or a limit on the number of withdraws allowed.
Problem identification is part of the ______ phase of the decision-making process.
Pre-shopping activities
The text identifies several phases in the buying process. The correct order of the phases is
Pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities
Credit files can include all except:
Race or nationality
Margaret signed the back of her check with words "pay to the order of Penelope." She used a(n)
Special endorsement
Callable CD
Start with higher rates and usually have long maturities as high as 10 to 15 years
Another name for a regular savings account is a
Statement account
The amount printed on a label that is posted on a vehicle is called
Sticker price
A certificate of deposit that has different interest levels based on market performance is called a
Stock-indexed CD
Xavier bought a certificate of deposit whose interest rate changes. In fact, he might even earn 0% interest on his investment for a time. He purchased a
Stock-indexed CD
Why are some financial service operations referred to as financial supermarkets?
They offer a combination of services from one source
Which of the following is NOT correct regarding real estate agents?
They require that you conduct your own showings
Georgina and Henry are looking at houses. Which of the following is correct?
They should asses the school system in the area they want to live
Elaine purchased her living unit in a building with 5 other separate units. She purchased a
Townhouse
Cost of Open End Credit
Truth in Lending Act requires that open-end creditors inform consumers how the finance charge and APR will affect their costs
Bankruptcy abuse prevention and consumer protection act of 2005 by George Bush
Under the new law, Americans who have the ability to pay will be required to pay back at least a portion of their debts. To declare bankruptcy again, it has to pass eight years.
A standard measurement used to compare packages of different sizes is
Unit pricing
Open end credit
Use as needed until line of credit max reached -credit cards -department store cards -home equity loans You pay interest and finance charges if your do not pay the bill in full when due Revolving check credit Bank line of credit
When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services include all except
Working for the buyer
Fair credit reporting act
You may sue any credit bureau or creditor that violates the rules regarding access to your credit records, or that fails to correct errors in u credit file.
All of the following are signs of financial trouble except:
You pay your credit card bills in full each period.
Which of the following is often the first sign of a stolen identity?
You receive bills for a credit card account you never opened
Which of the following sources would be the LEAST helpful when purchasing a vehicle?
Your cousin who has never purchased a car
pawnshop
a business that gives customers high-interest loans with personal property, such as jewelry, held as collateral
debit card
a plastic access card used in computerized banking transactions; also called a cash card
interest-only mortgage
allows a home buyer to have lower payments for the first few years of the loan
check-cashing outlets (CCO)
charge high fees just to have a paycheck or government check cashed, sometimes called currency exchanges
Limited Warranty
covers only certain aspects of the product, such as parts, or requires the buyer to incur part of the costs for shipping or repairs.
implied warranties
created by state laws may cover some problems areas; other repair costs can occur
A bump-up CD allows an investor to increase the amount invested.
false
A callable CD allows investors to 'cash in' their investment early.
false
A clear statement of a problem is: "I need to have a car."
false
A college ID that includes prepaid amounts for meals is called a debit card.
false
A commercial bank is the same thing as a credit union.
false
A duplex is a house with two or more separate dwellings.
false
Making transactions using a credit card will immediately reduce your bank balance.
false
Merrill bought a house and applied for a loan through the VA (Veterans Administration). The VA will provide the down payment when he closes on the house.
false
When interest rates are high and the demand for homes is low, prices of homes will likely be at a premium.
false
You have a legal right to sue a credit bureau if you observe an error in your file.
false
Your decision to rent or to buy your residence should be based solely on lifestyle factors.
false
Extended Warranties
for a fee, the buyer is insured against losses due to the cost of certain repairs and losses.
building a home
for people who want certain specifications.
Electronic Fund Transfer Act
if a financial institution does not follow the provisions of the EFTA, u may sue for actual damages + punitive damages of not less than $100 or more than $1,000. U r also entitled to court and attorney fees in a successful lawsuit. Class action suits r also permitted.
After-tax rate of return formula
interest rate x (1 - tax rate)
mobile homes
is not completely accurate term since very few are moved from their original sites. Typically smaller than 1,000 square feet.
Bankruptcy 1
it is a legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts. It may also include a plan for the debtor to repay creditors on an installment basis. This is the last resort as it severely damages u credit rating.
townhouse
may contain two, four, or six living units
Time deposits
money in savings account and certificates of deposit (also called Savings).
Refinance
obtaining a new mortgage to replace an existing one
Financial Literacy in Practice
offers guidance on actions you might take if your property taxes rise to an inappropriate level
Legal Aid Society
one of a network of publicly supported community law offices that provide legal assistance to people who cannot afford their own society.
line of credit
open ended type of credit.
Counteroffer
owner indicates a willingness to negotiate a price
Lessor
owner; landlord
buyer agents
represent the buyer's interests and may be paid by either the buyer or the seller.
Truth in Savings Act
requires the disclosure on savings account plans (1) fees on deposit accounts, (2) the interest rate, (3) the annual percentage yield (APY), (4) other terms and conditions of the savings plan
Conditions
the general economic conditions that can affect a borrower's ability to repay a loan.
Chapter 7
the individual is required to draw up a petition listing his or her assets and liabilities. A person who files for relief under the bankruptcy code is called a debtor. The debtor submits the petition to a U.S. district court and pay a filing fee. not all debts are forgiven. All the debtor's assets r sold to pay off creditorsCertain assets receive some protections such as social security payments, unemployment compensation, and the net value of u home, vehicle, household goods and appliances, tools used in u work, and books.
rate of return
the percentage of increase in the value of your savings as a result of interest earned; also called yield
Capitalized Cost
the price of the vehicle.
amortization
the reduction of a loan balance through payments made over a period of time
A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company.
true
A credit file can include your spouse's name and Social Security number.
true
A handyman's special is a home that needs work and is priced lower than homes in better condition.
true
Express Warranty
usually in written form, is created by the seller or manufacturer and has two forms: the full warranty and the limited warranty.
Highballing
when offered a very high amount for a trade-in vehicle, with the extra amount made up by increasing the new-car price.
Which of the following is the only online source authorized to provide a free credit report each year at your request?
www.annualcreditreport.com
Nancy invested $10,000 in a certificate of deposit earning 6% per year. Unfortunately, she needed to withdraw it before the maturity date. If the penalty involved two months of interest, what was her total penalty?
$100
Using the following information, what is the cost to lease a car? Security deposit $250 Monthly lease $300 per month for a 4-year lease Opportunity cost of down payment $250 loan period in years 2% interest End-of-lease charges $800
$13,870
Acme Home Lending offers home equity loans up to 75 percent of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $65,000, how much can she borrow in a home equity loan from Acme?
$85,000
I bonds
-Earns a fixed rate plus an inflation rate -Twice-a-year inflation adjustment
Timothy Calibe has net monthly income of $4,200. He has a monthly auto loan payment of $350, a student loan payment of $120, mortgage payment of $1,100 and a credit card minimum payment of $40. What is his debt-payments-to-income ratio?
12.1 percent
Rachel Efron has net monthly income of $2,400. She has a monthly auto loan payment of $250, a student loan payment of $120, and credit card minimum payment of $40. What is her debt-payments-to-income ration?
17 percent
Opal earned 8% in her savings account. If she is in the 25% tax bracket, what is her after-tax savings rate of return?
6%
If you are denied credit, you can contact the credit bureau and ask for a copy of your credit report. The bureau cannot charge a fee for this service as long as you ask to see your files within
60 days
Money Market Account (MMA)
A savings account offered by banks, savings and loan associations, and credit unions that require a minimum balance and has earnings based on market rates
What demographic originally used credit
Affluent
Credit Bureaus
Agencies that collect information on how promptly people and businesses pay their bills Credit bureaus obtain information from banks, finance companies, stores, credit card companies, and other lenders.
The Consumer Credit Counseling Service
Aids families with serious debt problems by helping them to manage their money better and set up a realistic budget
Payment Services
Allow you to transfer money to pay expenses and for daily business activities
investment companies
Also called mutual funds
A vehicle lease has several costs. Which of the following is the price of the vehicle?
Capitalized cost
Izzy is thinking about leasing a sports car. She will make monthly payments based on a money factor and the
Capitalized cost
Which of the following is NOT correct?
Credit cards typically offer a "float" of up to 10 days; Credit can increase the amount of money that will be available to spend in the future.
Consumer credit
Dates back to colonial times.
A joint account with Sara and Ean allows
Ean and Sara to both write checks on the account
Pauline just submitted an offer on her dream home. To show that she is serious, she also included
Earnest money
Following the signing of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors seeking to erase all debts will have to wait _____ years form their last bankruptcy before they can file again.
Eight
Which of the following is an account used to pay property taxes and home insurance?
Escrow
Comparison of product features is part of the ____ phase of the decision-making process.
Evaluating alternatives
Price analysis is part of the ____ phase of the decision-making process.
Evaluating alternatives
Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the mortgage calculation include all except
Expected maintenance costs
Most products come with some guarantee of quality. Which of the following is usually in written form, created by the seller or manufacturer and has two forms?
Express warranty
Mike bought a new car. His new car warranty probably included all except
Extended coverage for air conditionins
Paul is 23 years old and has a small amount to use as a down payment for his first house. He might be eligible for a(n)
FHA loan
Which of the following is NOT a credit bureau?
FICO
Settlement Costs
Fees and charges paid when a real estate transaction is completed; also called closing costs
closing costs
Fees and charges paid when a real estate transaction is completed; also called settlement costs
If you think your identity has been stolen, which of the following actions does the Federal Trade Commission recommend you take immediately?
File a police report
Andrew wants a loan that will allow him to pay back his 30-year mortgage in 15 to 18 years. His best choice is
Growing-equity mortgage
Comparison shopping will be beneficial for buying
Items that can be researched easily with advertisements
Most customer complaints result from the following except
Long product lives
Credit Report or Credit File
Record of your complete credit history contains your name, addresss, ss#, birthday, employer, position, income, and previous address. They are collected and maintained by credit bureaus. the info can be stored for only seven years, but if u apply for bankruptcy that fact can be reported for 10 years. A credit reporting agency cannot disclose info that is more than 7 or 10 years old unless u apply for a loan of more of $75,000.
Credit bureaus get their information from all of the following except:
References
Ursual has an account that will allow her to waive the minimum balance if she keeps a certain amount in savings. What kind of account does she have?
Regular checking account
When Jack picked up a personal computer form the ______, he really was leasing it.
Rent-to-own center
The text discusses several types of bonds. Which bond pays interest for 30 years that is exempt from state and local taxes?
Series EE
The text discusses several types of bonds. Which bond electronically deposits interest into your bank account?
Series HH
The text discusses several types of bonds. Which bond is purchased at face value and has two components to the rate of interest earned - a fixed rate as well as a rate that adjusts twice a year?
Series I
The U.S bankruptcy act of 1978
The bankruptcy is filed under a part of U.S bankruptcy code known as chapter 7. and chapter 13 ( a wage earner plan bankruptcy)
assumable
This feature allowed a home buyer to continue with the seller's original agreement.
Security depsoit
Usually required when you lease and is usually one month's rent.
Since Dan served in the Army, he should be eligible for a(n)
VA loan
Credit Union
a user-owned, nonprofit, cooperative financial institution that is organized for the benefit of its members
Indexed CD
have earnings based on the stock market
mortgage companies
provide loans specifically for buying a home or business
Prepaid Legal Services
provide unlimited or reduced-fee legal assistance for a set fee.
Mediator
tries to resolve a conflict between a customer and a business through discussion and negotiation.
The largest fixed expense associated with a new automobile is depreciation.
true
The least expensive loans are often provided by parents or other family members.
true
The longer the term for a loan at a given interest rate, the higher the overall interest charges.
true
The three major credit bureaus
experian, transunion, and Equifax. these bureaus maintains more than 200 million credit file on individuals based on info they receive from lenders. Bureaus get their info from banks, finance companies, stores, credit card companies, and other lenders.
A bankruptcy remains on a credit file for no more than 5 years.
false
A consumer applies for open-end credit to make a single purchase, such as a large appliance.
false
An aesthetic feature of a vehicle is air conditioning.
false
An example of a "preshopping activity" is negotiating the price of a product.
false
If you get a big-screen television from a rent-to-own center, you will be certain to own it after a period of time.
false
If you have a problem with a product, the first place you should express you dissatisfaction to is the corporate headquarters.
false
Liquidity and rate of return refer to the same thing.
false
Mortgage points are paid at the end of the mortgage.
false
Prices at the local Quick Market (convenience store) will probably be lower than the regional Big Box Retailer (grocery store).
false
The 'safety' concern with banks and credit unions refers to the potential loss of money due to investors' bad spending habits.
false
The Equal Credit Opportunity Act requires that a lender not turn you down for credit based on your age as long as you are old enough to sign a legal contract, which is usually allowed at age 16.
false
The debt-to-equity ratio is calculated by dividing your total liabilities, including mortgage, by net worth.
false
The easiest loans to obtain are also the least expensive.
false
The most expensive loans are often provided by parents or other family members.
false
Up-front cash
many lenders believe u have a higher stake in repaying a loan if u pay cash for a large portion of what you are financing. Doing so may give u a better chance of getting the other terms u want.
If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps below except
Your creditor must reimburse you for your time spent researching the error.
mutual savings bank
a financial institution that is owned by depositors and specializes in savings accounts and mortgage loans
savings and loan association (S&L)
a financial institution that traditionally specialized in savings accounts and mortgage loans
commercial bank
a for-profit institution that offers a full range of financial services, to individuals, businesses, and government agencies
fixer-upper
a home that needs work and that you are able to get at a lower price
home equity loan
a loan based on the difference between the current market value of a home and the amount the borrower owes on the mortgage (also called second mortgage)
Economists now recognize CONSUMER CREDIT
as a major force in the U.S. economy.
long-term financing is more costly than short-term financing
because of higher interest costs.
activity accounts
charge a fee for each check written and sometimes a fee for each deposit in addition to a monthly service charge
traveler's checks
check forms in specific denominations that are used instead of cash while traveling. Need to sign twice, once at the bank when you purchase them and then sign them again as you cash them. Electronic traveler's checks in the form of a prepaid travel card have been more common.
purchase agreement
contract which is your legal offer to purchase the home
Implied Warranty
covers a product's intended use or other basic understandings that are not in writing.
The trustee's role in a chapter 13 bankruptcy
distributing money to creditors.
debt payments to income ratio, total monthly debt payments (excluding home mortgage)
divided by the net monthly income of the consumer.
When Flo says she's going to "the bank," she may be implying that she is vising a credit union or stopping at an ATM.
true
Individuals who r legally able to look at u credit report r:
- Financial services, if applying for a loan - Insurance underwriters - In association with some legitimate business need
deed
A document that transfers ownership of property from one party to another.
manufactured homes
A dwelling completely assembled at a factory and transported to the site
Adjustable-Rate Mortgage (ARM)
A home loan with an interest rate that can change during the mortgage term due to changes in market interest rates; also called a flexible-rate mortgage or a variable-rate mortgage.
A cash advance
Accrues interest charges beginning the day the cash advance is made
Patrick is interest in opening a different account that will allow him to write checks, but he doesn't want to maintain a minimum balance. He should open a(n)
Activity account
According to the Fair Credit Billing Act, if a creditor fails to follow the rules that apply to correcting any billing errors, you have the right to sue for
Actual damages plus twice the amount of any finance charges
Average balance
Add the loan balance during the first and last month, and they divide by 2. AB 100 + 100 divided by 2 gives u a total of $100
Which of the following expenses is NOT usually recommended or necessary for a tenant?
All of the above are expected (Security deposit, Utilities, and Insurance)
In general, which fees have recently decreased for checking accounts?
All of the above have increased. (Overdraft fees, Stop-payment orders, and Check printing)
Failure to repay a loan may lead to all except:
All of the answers may be a result of the failure to repay a loan. (Bankruptcy, Loss of income, Loss of a good reputation, and Damage to family relationships)
special endorsement
Allows you to transfer a check to someone else with the words pay to the order of followed by the name of the other person and then your signature.
The finance charge for credit includes all except:
Amount borrowed
Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?
Budgeting spending
If you have an interest rate subsidy from a home builder or real estate developer, you have a(n)
Buy-down
Karen wanted a certificate of deposit that would definitely be available until the maturity date. She would NOT want to consider a
Callable CD
A loan officer is examining whether or not he/she will offer you a loan today. Specifically, he/she is examining your income and debts. Which of the five Cs is the loan officer reviewing?
Capacity
The question "what are your assets and net worth?" relates to
Capital
The price of a leased vehicle is known as the
Capitalized cost
Which of the following is NOT correct?
Check 21 increases the fees banks can charge for checking accounts.
Which of the following offers checking, savings, lending, and other services?
Commercial bank
Earning interest on interest is called
Compounding
Which of the following is a legal form of ownership where the owners pay a monthly fee for maintenance of the common areas?
Condominium
A fixed operating cost for a vehicle is
Depreciation
Which of the following acts sets procedures for promptly correcting billings mistakes, refusing to make credit card or revolving credit payments on defective goods, and promptly crediting accounts?
Fair Credit Billing Act of 1975
ECOA (Equal Credit Opportunity Act)
Gives all applicants the same rights. Credit providers may not discriminate based on Race or nationality , and Age.
If a loan is being paid in installments instead of all at the end of the loan period, the actual rate of interest will be
Higher than the stated rate
The periodic charge for the use of credit is
Interest
Simple interest formula
Interest =principal X rate of interest X time or I=P X R X T
Which of the following usually offers mutual funds?
Investment company
All of the following are appropriate questions you could ask before making a major purchase except
Is it possible to delay the purchase or to do without the item?, Should I pay for the item with cash or buy it on credit?, Which brands should I consider?, How do the price, quality, and service compare at different stores?
This provides the tenant protection from rent increases
Lease
When Angela wanted to provide financial security for her dependents, she considered purchasing a specific type of account at a
Life insurance company
Most products come with some guarantee of quality. This type of warranty covers only certain aspects of the product, such as parts.
Limited warranty
escrow account
Money, usually deposited with the lending institution, for the payment of property taxes and homeowner's insurance.
Which of the following primarily provides loans for home purchases?
Mortgage company
Which of the following will likely provide the most expensive access to funds?
Payday loan company
Which of the following is NOT a valid reason for borrowing?
Paying for everyday living expenses
Yvette has a flexible-rate mortgage that has a maximum monthly increase. This feature is called a(n)
Payment cap
Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called
Points
Resolving purchase concerns is part of the ___ phase of the decision-making process.
Post-purchase activities
These products are sold by one chain of stores and are low-cost alternatives to famous-name products.
Private-label brands and Store-brands
A no-haggling dealer will use a(n)
Set-price
If you have a problem whose remedy will be $1500 - $3000, the appropriate tool to use would be (a)
Small claims court
Many think that perhaps the greatest disadvantage of using credit is
The temptation to overspend.
bank reconciliation
To account for the differences between the bank statement and your checkbook balance.
duplex
a building that is divided into two separate homes
FICO is a better score to use than VantageScore for consumers with limited credit histories.
false
HH bonds are also known as Patriot Bonds.
false
zoning laws
restrictions on how the property in an area can be used
A balloon mortgage has fixed monthly payments for a period of time. At the end of that time, the entire principal balance must be paid in full.
true
A lease for a car or SUV is typically for three to five years.
true
A loan from a pawnshop will be more expensive than one from a bank.
true
According to the Fair Credit Billing Act from 1975, a consumer may tell his credit card company to stop payment for a defective good if he made a sincere attempt to resolve the problem with the store.
true
All money market funds are not covered by federal deposit insurance.
true
Closed-end credit is used for a specific purpose and involves a specific amount.
true
Consumer credit dates back to colonial times when it was extensively used by farmers.
true
I bonds earn interest based on a fixed rate plus inflation.
true
If you are a cosigner for a loan and the debt is not repaid, then that fact will appear on your credit report.
true
If you think that rates will fall, you should buy a long-term CD to lock your rate now.
true
Lenny the landlord has the right to take legal action against Tina the tenant if she does not pay her rent on a timely basis.
true
Most information in your credit file may be reported for only 7 years.
true
The Fair Credit Reporting Act, enacted in 1971, places limits on who can obtain your credit report.
true
The Truth in Lending Act requires that creditors explain how they calculate the finance charge.
true
The first sign of stolen identity might be that you get bills for a credit card account that you never opened.
true
The settlement of a difference by an arbitrator is legally binding.
true
You should keep a record of your credit card number separate form your card.
true
Your lifestyle affects your housing buying decisions.
true
Victor read the fine print for a checking account he was thinking about using. The find print read "A minimum balance of $500 is required. If your balance falls below this level, you will be assessed a monthly fee of $8." Since Victor was planning to only keep a $100 balance in his account, how much could he be charged each year?
$96.00
Examples of open-end credit
- Department store credit card - Overdraft protection - Using a bank credit card
the three types of closed-end credit
- Installment cash credit - Installment sales credit - Single lump-sum credit
The five Cs of credit
1. Character 2. Capacity 3. Capital 4. Collateral 5. Conditions
Personal bankruptcy can be filed under which section(s) of the U.S. bankruptcy code?
A and C are correct (Chapter 7 and Chapter 13)
An account that provides a complete financial services program for a single fee is known as
A cash management account
installment cash credit
A closed-end loan from the bank for personal purposes, home improvements, or vacation expenses is considered
Comparison shopping will be beneficial for buying all of the following except
A hot dog at the baseball park
lease
A legal document that defines the conditions of a rental agreement
Compounding
A process that calculates interest based on previously earned interest
Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe, which of the following should he use?
A savings account
Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)
ARM
cash machine
ATM
Which of the following questions is NOT needed before deciding how and when to make a major purchase?
All of the above are valid questions to ask. (Do I have the cash I need for the down payment?, Does the purchase fit my budget?, Could I postpone the purchase?, and Could I use the credit I need for this purchase in some better way?)
second mortgage
Allows a homeowner to borrow on the paid-up value of the property. (also called home equity loan)
Liquidity
Allows you to withdraw your money on short notice without a loss value or fees.
dual agent
An agent who represents both buyer and seller in the same transaction.
The APR is the percentage cost of credit on a(n) ______ basis.
Annual
Which of the following NOT a strategy for wise buying?
Buying items on impulse
Which of the following is a cost associated with a vehicle lease?
Capitalized cost, money factor, payment amount, and residual value
Craig wants to get his old car repaired, but he doesn't want to spend very much money. He probably will NOT want to go to a
Car dealer
The use of property or savings to secure a loan relates to
Collateral
Deposit Institutions
Commercial banks, savings and loans associations, mutual savings banks and credit unions.
When Jane researched the brands and prices of her refrigerator, she was
Comparison shopping
Jacob drives by a Big Box home improvement center on his way home from work. He usually stops and buys something because it makes him feel good. Jacob is
Compulsive shopping
Zelda is looking for a mortgage that will give her the option to change it to a fixed-rate mortgage. Which of the following will meet her criterion?
Convertible ARM
Which of the following is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building?
Cooperative housing
Tamra went to a restaurant and had an unpleasant experience that sent her to the hospital. The problems at the restaurant should be handled by
County health department
This type of promotion provides an immediate savings for consumers.
Coupons
A service contract
Covers the repair costs of a product.
Advantages of Credit
Current use of goods and services Permits purchase even when funds are low A cushion for financial emergencies Advance notice of sales Easier to return merchandise Convenient when shopping Provides a record of expenses One monthly payment Safer than carrying cash Needed for hotel reservations, car rentals, and shopping online Take advantage of float time/grace period Rebates, airline miles, or other bonuses Credit indicates financial stability
All of the following are variable operating costs for a vehicle except
Depreciation
The largest fixed expense associated with a new automobile is
Depreciation
Frank and Diane wanted to buy a house. Which of the following do they need before they purchase a house?
Down payment
Which of the following is NOT associated with credit cards?
Down payment on a home
Which of the following is NOT required when writing a check?
Driver's license number
Investments and tax assistance, both tools for financial planning, are also known as
Financial services
Most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time.
Full warranty
When purchasing a used vehicle, it is a good idea to
Have a trained and trusted mechanic of your choice check out the vehicle
Paul bought some bad gasoline that damaged the gas tank of his vehicle.
He should provide the gas station with documentation of his purchase and all repair costs.
Franklin wants to sell his house himself. Which of the following is NOT correct about his sale?
He should show the house only when he is home alone
Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except
His original cost
If you miss payments on a home equity loan, you can lose your
House
Which of the following is the best way to state a problem?
I need transportation.
Preston never opened his bank statements, so he was surprised to see that he received a service charge that exceeded the interest he earned for the month. What kind of account does Preston have?
Interest-earning checking account
Will wants to open up an account that will allow him easy access to his funds from many locations and would pay at least a low interest rate. What kind of account should he open?
Interest-earning checking account
If you do not pay back any of the loan amount for a portion of the loan period, you have a(n)
Interest-only mortgage
This gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property.
Lease
Karen bought a mixer. She received a warranty that covers only certain aspects of the product. If the product fails, she may required to pay part of the costs for shipping or repairs. Which of the following warranties does Frank have?
Limited warranty
Home Equity Loans
Loan based on your home equity Current market value of your home minus the amount you still owe on the mortgage Interest is tax deductible Should you be used for major purchases Example: Suppose you own a home worth $200,000. Your mortgage balance is $125,000. How much can you borrow using a home equity loan if the lender will allow up to 80% loan to value? 80% of $200,000 is $160,000 so you can borrow up to (160000 - 125000 - 35000
A vehicle lease has several costs. Which of the following is the interest rate used to calculate the monthly cost?
Money factor
Justin needs to have access to his money in 5 months. the best option for his savings is
Money market account
Zach wants to open up an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open?
Money market account
Amber wants to open up an account, but she doesn't know which kind is appropriate. She is interested in earning a higher interest rate and plans to keep at least $1,000 in her account so she can avoid paying a fee. Amber wants to open her account at an investment company. What kind of account should she open?
Money market fund
When calculating the debt-to-equity ration, the following is NOT included:
Mortgage balance
These products are highly advertised and available at many stores
National-brands
A vehicle lease ha several costs. Which of the following is the periodic cost?
Payment amount
If you want to pay a set fee to receive unlimited or reduced-fee assistance, you should use (a)
Prepaid legal services
life insurance companies
Provide financial security for dependents with various life insurance policies, some containing savings and investment features. Expanded activities of life insurance companies include investment and retirement planning services.
savings
Provides safe storage of funds for future use (commonly called time deposits)
Inflation
Rate of return you earn on your savings should be compared with the inflation rate. In general as the inflation rate increases, the interest rates offer to savers also increase.
Fair Credit Billing Act of (FCBA)
Set procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments. People must - Correct the mistake in a timely fashion - Provide a written acknowledgment of the complaint
Common payment choices for everyday activities include all except
Short-term loan
A loan that must be repaid in total on a specified day, usually within 30 to 90 days is
Single lump-sum credit
Major factors that affect the affordability of your mortgage include all except
Size of home
If a check is lost or stolen, you should use a
Stop-payment order
Walt decided to sell the home he lived in for 50 years. The house has 2 bedrooms on the first floor, a finished basement, and a finished attic with a low ceiling. To prepare his home for sale, he should
Take steps to make the house appear bright and large
Taxes
Taxes reduce interest earned on savings
Float
The time before the money is needed to be paid.
Many people expect
Their incomes to increase to make it easier to make payments
Which of the following is NOT correct?
Traditional financial guidelines suggest that your home should cost about 5 times your annual income; Caryn's suggestion to open drapes but keep lights turned off to conserve energy will give her property a positive image
Before buying goods and services on credit, a consumer should consider all except:
Whether the good or service will be worth more because they were purchased with credit instead of cash
Each 1% increase in the inflation rate means:
a decrease of aprox. 1% in the quantity of goods or services u can purchase with a given amount of money.
cooperative housing
a form of housing in which a building containing a number of housing units is owned by a nonprofit organization whose members rent the units
A benefit of investing in a certificate of deposit is the penalty for early withdrawal.
false
Each year, fewer and fewer checks are being written.
false
Interest paid on a credit card is a tax-deductible.
false
The add-on interest calculation uses the formula: Interest = Principal (Rate of interest Time).
false
People should be prepared for problems with purchases.
true
bank reconciliation process
(1) compare the checks written with those reported as paid on the statement. Use the canceled checks, or compare your check register with the check numbers reported on the bank statement. Subtract from the bank statement balance the total of the checks written but not yet cleared. (2) determine whether any deposits made are not on the statement; add the amount of the outstanding deposits to the bank statement balance. (3) subtract fees or charges on the bank statement and ATM withdrawals from your checkbook balance (4) add any interest earned to your checkbook balance.
Evaluating adjustable-rate mortgages
(1) determine the frequency of and restrictions on allowed changes in interest rates (2) consider the frequency of and the restrictions on changes in the monthly payment (3) investigate the possibility that the loan will be extended due to negative amortization, and find out if a limit exists on the amount of negative amortization (4) find out what index is used to set the mortgage interest rate
writing checks procedure
(1) record the date, (2) write the name of the person or organization receiving the payment, (3) record the amount of the check in numerals, (4) write the amount of the check in words; checks for less than a dollar should be written as "only 79 cents" for example, and cross out the word dollars on the check (5) sign the check, (6) note the reason for the payment
When a mistake is made and a consumer complains, The Fair Credit Billing Act requires that the creditor must:
- Correct the mistake in a timely fashion - Provide a written acknowledgment of the complaint
billing error
- Goods or services purchased without your authorization. -A mathematical error - When the business mails your statement to an incorrect home address. - Being forced to pay for defective goods.
The questions that lenders tend to ask to determine a potential borrower's CHARACTER
- Have u used credit before? - How long have you lived at your present address? - How long have you held your current job?
steps to avoid and report fraud on the internet
- Keep records of online transactions - Review monthly bank and credit statements. - Use a secure browser
techniques for managing credit history
- Look for errors and report them immediately - Review monthly bank and credit statements - Check your credit report annually
Advantages of borrowing from a credit union
- Patient with borrowers - Personalized service
If an unauthorized person accesses your credit report, they could:
- Receive jail time - Pay a fine
Hannah has liabilities totaling $25,000 (excluding her mortgage of $75,000). Her net worth is $50,000. What is her debt-to-equity ratio?
.50
Lenders may determine a potential borrower's character by checking:
1. Checking personal or professional references 2. Checking the potential borrower's credit report. 3. Verifying how long u have been on u current job.
Variable-Rate Mortgage
A home loan with an interest rate that can change during the mortgage term due to changes in market interest rates; also called a adjustable-rate mortgage or a flexible-rate mortgage
Flexible rate mortgage
A home loan with an interest rate that can change during the mortgage term due to changes in market interest rates; also called a adjustable-rate mortgage or a variable-rate mortgage.
If you are selling your house by owner, you should still enlist the assistance of
A lawyer or title company to assist with the contract, closing, and other legal matters
share account
A savings account at a credit union
Money Market Funds
A savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial institutions.
endorsement
A signature or stamp on the back of a check transferring ownership
Which of the following is NOT a valid credit application question?
All of the above are valid credit application questions. (How much of a loan are you requesting?, What is the account number for your checking account?, What is the name of the nearest relative not living with you?, and How many dependents do you have?)
When you select a financial service provider, you should ask all of the questions except
All of the questions above should be asked. (Will I be able to borrow money if I need it?, How can I minimize the cost of checking and payment services?, and Where can I get the best return on my savings?)
Carrie thought she misplaced her checkbook for a few days. When she found it, she noticed that two checks, her cash and her debit card were missing. She immediately thought about the increase in identity theft in her area and decided to take some action. She should take all of the following steps except
All of the steps above are appropriate to take if she suspects identity theft. (Stop payment on the missing checks, Cancel her debit card, Get a new debit card with a new personal identification number (PIN), and Close her bank account and open a new one.)
Which is NOT true about the Fair Credit Reporting Act?
Allows borrowers to receive free annual credit reports
Ricky has a conventional mortgage. He can monitor his interest and principal payments using
Amortization
Credit
An arrangement to receive cash, goods, or services now, and pay for them in the future Based on trust in people's ability and willingness to pay bills when due
The Truth in Savings Act requires financial institutions to disclose _____ on savings accounts.
Annual percentage yield (APY)
When Nancy buys her house, the mortgage company will probably conduct a(n)
Appraisal
Chloe signed the back of her check with nothing else by it. She used a(n)
Blank endorsement
Logan paid a bill with a special form. He received this form at his financial institution and had to pay a fee. He used a
Cashier's check
Under Chapter 7 of the U.S. Bankruptcy code,
Certain assets receive some protection
Molly purchased a $1,500 HDTV from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using
Closed-end credit
restrictive endorsement
Consists of the words for deposit only, followed by your signature, which is especially useful when you are depositing checks.
Which of the following is the document that transfers ownership of property from one party to another?
Deed
When evaluating your credit application, a lender may NOT
Deny you if you receive public assistance
Which of the following is an example of open-end credit?
Department store credit card
Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n)
Dual agent
Helga plans to purchase a pick-up truck. She should begin her price negotiation at the
Invoice price
The dealer's cost is also known as the
Invoice price
Cashier's Check
Is a check issued by a financial institution. You may purchase one by paying the amount of the check plus a fee.
cerified check
Is a personal check with guaranteed payment.
Adolph has a low income and needs legal assistance. He should make use of (a)
Legal aid society
Which of the following is not a legal option for upper-income consumers?
Legal aid society
If you double the monthly payment for a credit card, the loan will be paid off in
Less than half the time
The tenant is the
Lesse
The owner/landlord is known as the
Lessor
When Smee applied for a loan, he was assured that his rate would not change if he closed within a specific time period. Smee had a
Lock
Which of the following is NOT a benefit of home ownership?
Maintenance and costs of repairs and home improvements
All of the following are fixed operating costs for a vehicle except
Maintenance and repairs
Home equity loans should be used for
Major expenses such as home improvements or education
Diane purchased her house and had it assembled before it was moved to her lot. She purchased a
Manufactured home
rising-rate or bump-up CDs
May have higher rates at various intervals, such as 6 months. However, beware of ads that highlight a higher rate in the future.
Buying a vehicle can be a challenging process. When researching a vehicle, a consumer may want to consider all of the following except
Mechanical devices to improve performance, convenience options such as air conditioning, and aesthetic features like metallic paint
Which of the following is an advantage of a car lease?
Monthly lease payments are usually lower than monthly financing payments
Multiunit Dwellings
More than one living unit, could be a duplex or town house.
Which of the following is an example of closed-end credit?
Mortgage
saving safety
Most savings plans at banks, savings & loans associations, and credit unions are insured by agencies affiliated with the federal government. Federal Deposit Insurance Corporation (FDIC) covers up to $250,000 per depositor per insured financial institution (banks use these). Credit unions are covered by National Credit Union Association (NCUA).
Private mortgage insurance
Must be terminated automatically when the homeowner's equity reaches 22 percent of the property value when the loan was initiated
Which of the following provides deposit insurance for credit unions?
NCUA
Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly payments have not covered her interest owed. As a result, her home equity is decreasing because of
Negative amortization
A potential problem with having a long car loan is
Negative equity
Which of the following items should be shredded to protect yourself form identity theft?
Papers with personal information
Which is often considered to offer the least expensive loans?
Parents or family members
Harvey needed some cash quickly, so he received a short-term loan based on the value of an old ring. Where did he go?
Pawnshop
When Imogene brought a necklace to a ______, she received a loan based on its value.
Pawnshop
During a home purchase closing, you should
Pay all closing costs, settle last-minute items, and sign documents
All of the following are non-deposit institutions except
Payday loan company
Louise got caught in a cash flow trap and needed money quickly. Unfortunately, she didn't shop around and she went to a ______. As a result, her annual percentage rate was higher than 375%!
Payday loan facility
Properly maintaining and operating the product is part of the ___ phase of the decision-making process.
Post-purchase activities
Information gathering is part of the _____ phase of the decision-making process
Pre-shopping activities
Wanda bought a certificate of deposit and automatically received a free bike. She purchased a
Promotional CD
The Equal Credit Opportunity Act (ECOA) prohibits a lender form discriminating based on
Race, Nationality, Age, and Sex
The partial refund of the price of a product is called
Rebates
Negotiation activities are part of the ____ phase of the decision-making process.
Selection and purchase
The text discusses several types of bonds. Which bond is also called a Patriot Bond?
Series EE
deposit institutions/depository intermediaries
Serve as intermediaries
Which of the following is a type of electronic payment?
Smart card
Jennifer received a $50 gift card for her favorite retailer. What kind of card did she receive?
Stored-valued card
The opportunity to have another person take over rent payments and live in the rental unit is called a
Sublease
Bankruptcy courts treat gift cards
The same way they handle unsecured debt
Kelly selected a home and submitted an offer to the seller.
The seller may choose to provide a counteroffer
The minimum monthly payment of a credit card is
The smallest amount you can pay and remain a borrower in good standing
The Federal Trade Commission enforces the fair debt collection practices (FDCPA)
This act prohibits certain practices by debt collectors.
What should a home buyer consider when evaluating a house?
Zoning laws, Location of businesses and future construction projects, School system, Property values of the community
Class-Action Suit
a legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice.
trust
a legal agreement that provides for the management and control of assets by one party for the benefit of another
Closing
a meeting of the seller, the buyer, and the lender of funds, or representatives of each party, to complete the transaction
appraisal
an estimate of the current value of the property and is not a home inspection, but an assessment of the market value of the property
A condominium is a form of housing in which the units in a building are owned by a nonprofit organization.
false
A convenience option that consumers may look for in a vehicle specials trim.
false
A disadvantage of home ownership is the deductibility of mortgage interest and real estate tax payments.
false
A disadvantage of using credit is its use when making a hotel reservation.
false
A good time to use a lawyer is when you appear in small claims court.
false
A landlord has the right to sublet an apartment.
false
A savings account is also known as a demand deposit.
false
A secured credit card is most appropriate for someone with a strong credit background.
false
A trade off of credit is that it increases the amount of money that will available to spend in the future.
false
A vehicle that looks rusty on the outside will have major operational problems.
false
Abigail checked out brands and prices of blue jeans at several stores. She was impulse shopping.
false
About 50 percent of home sales are By Owner.
false
According to law, a creditor may threaten you credit rating while you are negotiating a billing dispute.
false
According to the Fair Credit Billing Act from 1975, a creditor must adjust the disputed amount in your account or tell you why the bill is correct within 30 days.
false
Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power.
false
An advantage of a second mortgage is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.
false
An advantage of renting is pride of ownership.
false
An approved mortgage application usually locks in an interest rate for 60-120 days.
false
As interest rates increase, more people have the ability to afford an average-priced home.
false
At the closing of a home purchase, the buyer conducts a walk-through of the property.
false
Closed-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.
false
Consumer credit allows businesses to be more efficient or more productive.
false
Consumer credit refers to the use of debit cards for personal needs.
false
Due to Check 21, the processing time for checks has increased.
false
During the grace period, finance charges are assessed at only half the normal rate.
false
Experts suggest that you spend more than 20 percent of your after-tax (net) income on consumer credit payments.
false
Home improvements will definitely increase the selling price.
false
If a bank allows online transactions, it must also allow face-to-face transactions at the bank.
false
If you are somewhat interested in a specific vehicle, you should provide a small deposit so the car seller will hold the vehicle for you.
false
If you have a problem with a product and you really want to get the attention of someone in customer service, you should raise your voice during your conversation.
false
If you pay an extra $100 per month on your mortgage, your total loan principal will decrease and your total interest will remain the same.
false
If your home is assessed for $200,000, the market value of the home should be less than $200,000.
false
In October 2008, the FDIC announced the temporary Transaction Account Guarantee Program and increased coverage for accounts at insured institutions to $200,000 per depositor.
false
In the five Cs of credit, capacity refers to the borrower's trustworthiness and stability.
false
In the five Cs of credit, capital refers to the borrower's ability to pay additional debts.
false
In the five Cs of credit, conditions refer to what will happen if the borrower does not repay the loan.
false
Lemon laws have been enacted in 48 of the 50 states for new vehicle purchases.
false
Most new mortgages are assumable.
false
One of the best ways to compare packaged food products is to use rebate pricing.
false
One of the first steps in a car purchase negotiation should be a discussion of the trade-in vehicle.
false
Private mortgage insurance is usually required if the down payment for a home is less than 30 percent.
false
Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank's perspective.
false
Rental insurance isn't important since the landlord's insurance on the building includes coverage on all tenant's belongings.
false
Service contracts on vehicles usually are wise financial decisions.
false
Small claims court is used to take legal action by a few individuals on behalf of all who have suffered the same alleged injustice.
false
Studies of consumer problems consistently rank auto repairs as one of the best consumer services with few consumer complaints.
false
The Annual Percentage Rate is lower than the stated rate for loans that are repaid in monthly payments.
false
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it easier for consumers to file Chapter 7 bankruptcy.
false
The Truth in Savings Act requires financial institutions to disclose the interest rate on loans.
false
The amount of interest paid is independent of the length of the loan.
false
The best option for borrowing money at low rate is to use a payday loan organization.
false
The best place to find a qualified lawyer who will meet your specific needs is a phone book.
false
The best time to ask a lawyer about his fees is after he wins a case for you.
false
The expected rate of inflation should not be considered when determining the amount of interest a creditor should charge.
false
The higher your FICO score, the more risk you pose to creditors.
false
The longer it takes for you to pay off a bill, the less interest you pay.
false
The most common conventional mortgage is the 20 year ARM.
false
The only question you should ask yourself when selecting a financial service provider is "Where can I get the best return on my savings?"
false
The only way that you can have long-term financial security is to not save all your current income.
false
The phases of buying are: problem identification, pre-shopping activities, evaluating alternatives, selection and purchase, post-purchase activities.
false
The purpose of an escrow account is to pay the points at closing.
false
The settlement of a difference by a mediator is legally binding.
false
rate cap
restricts the amount by which the interest rate can increase or decrease during the ARM term. This limit prevents the borrower from having to pay an interest rate significantly higher than one in the original agreement.
bank statement
summarizing deposits, checks paid, ATM withdrawals, interest earned, and fees such as service charges and printing checks.
When referring to credit, character means:
the borrower's attitude toward credit obligations.
When referring to credit, capacity refers to:
the borrower's financial ability to meet the credit obligation.
Residual Value
the expected value of the vehicle at the end of the lease.
Money Factor
the interest rate being paid on the capitalized cost.
Fair Credit Billing Act
the law protects consumers by settings standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise.
A real estate agent can provide service to save you time and effort with selling your home.
true
A service contract is frequently called an extended warranty even though service contracts are not warranties.
true
A trade-in vehicle should NOT be mentioned until the cost of the new car has been settled.
true
A vehicle that looks rusty on the outside may hide a well-maintained engine.
true
Abigail checked out brands and prices of blue jeans at several stores. She was comparison shopping.
true
An advantage of a buy-down is the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.
true
An advantage of a lease over a purchase is that the buyer can usually obtain a more expensive vehicle for the same monthly payment.
true
Angela wanted to rent an apartment, so her landlord required her to sign a lease. The lease is a legal document that defines the conditions of her rental agreement.
true
As inflation rates increase, the interest rates offered to savers usually increases.
true
Cam has an overwhelming desire to buy things whenever she goes shopping. One could say that he is a compulsive shopper.
true
Credit can indicate stability since lenders consider you a good risk.
true
Economists recognize consumer credit as a major force in the American economy.
true
FICO and VantageScore are two methods used to judge creditworthiness.
true
If you purchase something with a credit card, the finance charges you pay on an item could end up being more than the item is worth.
true
In the five Cs of credit, character refers to the borrower's trustworthiness and stability.
true
Installment sales credit is a loan that allows a consumer to purchase high-priced items.
true
Joe bought some cheese at his local grocery store. After he brought it home, he noticed, it was moldy even thought the expiration date was still three weeks away. He should call the toll-free hotline number printed on the package to tell the company of the problem he encountered.
true
Lydia found a check that she was given for her birthday 9 months earlier. Her bank should refuse to cash the check.
true
Most low and middle income people will NOT qualify for a VA-guaranteed loan.
true
One of the best places to find a qualified lawyer who will meet your specific needs is referrals from friends.
true
Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.
true
Thomas bought a toaster that would not toast bread and returned it. The manufacturer accepted the return because it was defective and had a full warranty.
true
Tracy went to a local restaurant and became ill from the meal she ate. She can contact her city or county health department to handle problems with the restaurant.
true
When Ted needs cash, his choices include liquidating savings and borrowing.
true
When used effectively, credit can help a consumer have more and enjoy more.
true
A demand deposit is also known as
A checking account
If bankruptcy is filed by the consumer, this:
remains in the credit report for up to 10 years.
The unit price of a 64 ounce carton of orange juice that costs $3.20 is
$0.05 per ounce
The unit price of a 2 pound (32 ounces) box of brown sugar that costs $3.20 is
$0.10 per ounce
Rachel Efron went to the ATM to draw $200 cash with her debit card. She inadvertently pulled out her credit card instead, not realizing the expenses for cash advances. If her credit card company charges a cash advance fee of 3 percent and interest at 24 percent APR, what are the total fees she will pay for her mistake?
$10
The average used car costs about ______ less than the average new car.
$10,000
Timothy Calibe went out to eat with his girlfriend at a fancy restaurant. When he tried to pay the bill with his Mastercard credit card, he use the ATM across the street to withdraw cash using his credit card. Tim did as suggested and didn't pay attention to any fees until he received his credit card statement one month later. He was shocked to see the total fees (3 percent cash advance) and his APR was increased to 21 percent. Given the cost of the meal ($150) plus the associated fees, how much did his meal cost him?
$157.13
Using the following information, what is the cost to buy a car? Down payment $2000 Monthly loan payment $300 per month for a 5-year loan Opportunity cost of down payment $2000 loan period in years 2% interest Estimated value of vehicle at end of ownership period $2000
$18,200
improper use of credit:
- Bankruptcy - Default and loss of credit rating
If you have reached the upper limit of debt obligations, your debt-to-equity is about
1
How to minimize your borrowing costs
1. Variable interest rate 2. A secure loan 3. Up-front cash 4. A shorter term
How to complete a dispute billing error:
1. Write a letter of complaint 2. pay portion of bill not in dispute 3. receive an acknowledgment from the credit company.
What is the APY for a one-year $8,000 Certificate of Deposit with $1,120 interest?
1.4%
Information about a personal bankruptcy may be reported in your credit file for
10 years
A typical grace period for many credit card issuers is
20 - 25 days
Experts suggest that the debt payments-to-income ratio should be a maximum of
20 percent
the maximum debt payment to income ratio that is acceptable is around
20%.
grace period for retailers
20-30 days
FICO socres generally range from
350 to 850
FICO credit score
350 to 850 Higher score - Less risk Available from www.myfico.come for a feww
What is the APY for a savings account with a $500 balance that receives $24 interest for the year?
4.8%
Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by:
A and B are correct. ( Adding up basic monthly expenses then subtracting this total form take-home pay, Multiplying your take-home pay by 50 percent and subtracting your current loan payments.)
A legal agreement that provides for the management and control of assets is known as
A trust
Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?
A trust
annual percentage yield (APY) formula
APY=100 [ (1+interest/principal) 365/days in term -1]
Mutual funds
Are investments companies that offer a money market fund - a combination savings-investment plan. The company uses money from many investors to purchase a variety of short-term financial instruments. However, unlike accounts at most deposit institutions, investment company accounts are not covered by federal deposit insurance.
Which of the following expressions is correct?
As the consumer goes, so goes the U.S. economy.
What step can you take if your credit application is denied?
Ask why you were denied credit
Which of the following is a disadvantage of a car lease?
At the end of the lease, you have no ownership interest int he vehicle
If you have a mortgage that has a large final payment, you have a(n)
Balloon mortgage
Which of the following is correct?
Bank customers typically are provided with online access to view and print checks that have been paid.
If you want to buy U.S. savings bonds, you may purchase them at
Banks, Financial institutions, and Online
What to do If your identity is Stolen
Contact the three major credit bureaus -Ask the fraud department to institute a fraud alert -Request that creditor call you for permissions before opening any new accounts in your name Contact Creditors -Chek for any accounts that have been tampered with or opened frequently File a police report -Keep a copy
Madeline wants to purchase a larger house. However, she had not yet sold her current home. She may want to include a(n) _____ in her offer.
Contingency clause
Paul and Lora built their home. When they researched contractors they paid attention to all of the following exept
Contractor's property tax payments during construction
A credit cardholder who pays off his balances in full each month is known as
Convenience user
If you have the option to change your adjustable-rate mortgage to a fixed-rate mortgage during a certain period, you have a(n)
Convertible ARM
Which of the following is a form of housing in which the units are owned by a nonprofit organization?
Cooperative housing
Consumer Credit Protection Act
If the creditor give false or inaccurate info on u credit. under the law, the creditor must prove the disputed info is accurate; otherwise, the victim can sue for damages. the maximum amount that u must pay if someone uses u card illegally is $50.00. However, if u manage to inform the company before the card is used illegally, u have no obligation to pay at all.
Think about consumer complaints. Which of the following is correct?
If you don't get satisfaction from working with headquarters, you may get assistance form a mediator in order to avoid legal action.
Frank bought some mini-blinds. Although he did not receive a written warranty, the blinds should be expected to open and close properly. What kind of warranty does Frank have?
Implied warranty
Most products come with some guarantee of quality. This type of warranty covers the product's intended use or other basic understandings that are not in writing.
Implied warranty
When used effectively, credit can result in
Improved lifestyle
While Paul was shopping for a new chainsaw, he found a great deal on new drill and bought it. This an example of
Impulse shopping
Which of the following is correct about inflation?
In order to increase buying power, you need to earn a rate higher than the rate of inflation
A direct loan for personal purposes, home improvements or vacation expenses is called
Installment cash credit
Other Financial Services
Insurance, investments, tax assistance, financial planning
Which of the following refers to the opportunity to withdraw money on short notice without incurring a loss in value?
Liquidity
A credit cards is a type of
Loan
A drawback of a regular savings account is
Low rate of return
A drawback of a savings account is
Low rate of return
A variable operating cost for a vehicle is
Maintenance and repairs
Closed End Credit
One time loans for a specific purpose that you pay back in a specified period of time, and in payments of equal amounts Mortgage, automobile, and installment loans for furniture, appliances and electronics 3 most common types of closed-end credit 1. Installment sales credit 2. Installment cash credit 3. Single lump- sum credit
Individual Account
Only one person is allowed to write checks on an individual checking account.
This shopping device is used primarily on perishable products.
Open dating
Trenton wants to buy a house, but can only provide a 10 percent down payment. He probably will be required to have
PMI
Renting vs buying a house
Renting Advantage: -Easy to move -Fewer responsibilities for maintenance -Minimal financial commitment Renting Disadvantage: -No tax benefits -Limitations regarding remodeling -Restrictions regarding pets, other activities Buying Advantage: -Pride of ownership -Financial benefits -Lifestyle flexibility Buying Disadvantage: -Financial commitment -Higher living expenses than renting -Limited mobility
George has never bought a car before. Which of the following techniques should he use to get the best deal?
Research the actual dealer cost and begin negotiations form that point
A vehicle lease has several costs. Which of the following is the expected value at the end of the lease?
Residual value
The expected value of a vehicle at the end of a lease is called the
Residual value
Zoe signed the back of her check with words "for deposit only." She used a(n)
Restrictive endorsement
A prearranged loan up to a specified amount that a consumer can access by writing a special check is known as
Revolving check credit
Choosing the payment method is part of the ____ phase of the decision-making process.
Selection and purchase
Disadvantages of Consumer Credit
Temptation to overspend Can create long-term financial problems and slow progress toward financial goals Potential loss of merchandise due to late or non-payment Tires up future income Credit costs money - more costly than paying with cash
Which of the following is a disadvantage of renting?
Tenants cannot take tax deductions for mortgage interest and property taxes
Which of the following is NOT a financial publication that can provide information about financial services and economic conditions?
The Daily Market
Most tenants sign a lease. Which of the following is part of a lease agreement?
The conditions under which the landlord may enter the apartment
Who is responsible for a loan repayment?
The cosigner
The primary benefit of a home equity loan is
The deductibility of the loan interest o federal taxes
Sam is comparing the costs of two loans. One is due in one year and the other is due in four years. Both have the same stated rate of interest. Which of the following is true?
The interest paid for the one year loan will be lower than the interest paid for the four year loan.
A line of credit is
The maximum dollar amount of credit the lender has made available
checking account restrictions
The most common limitation on a checking account is the required amount that must be kept on deposit to earn interest or avoid a service charge. A waiting period before you can access the funds.
annual percentage yield (APY)
The percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365-day period.
Prequalify
The process of determining how much money you are qualified to borrow
Rent-to-own centers (RTO)
The rent-to-own (RTO) industry is defined as stores that lease products to consumers who can own the item if they complete a certain number of monthly or weekly payments. Many RTO purchases can result in annual interest rates of over 300 percent
Series EE bonds
a non marketable, interest-bearing U.S. Government savings bond issued at a discount from the par value. Interest is exempt from state and local taxation. Exempt from federal tax if the funds are used to pay tuition and fees at a college. Must be at least 24 years old to purchase.
Small Claims Court
a person may file a claim involving mounts below a set dollar limit.
Earnest Money
a portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer
money order
a printed order for payment of a specified sum, issued by a bank or post office.
Payday Loan
a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck. Also called cash advances, check advance loans, postdated check loans, and delayed deposit loans.
Certificate of Deposit (CD)
a savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate of return
Collateral
a valuable asset that is pledged to ensure loan payments. If u fail to repay the loan, the creditor may take whatever u pledged as collateral.
Lowballing
a very low price that increases when add-on costs are included at the last moment.
Warranty
a written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired.
sublet
allows you to have another person take over rent payments and live in the rental unit
Walk Though
allows you to inspect the condition of the home
joint account
an account held by two or more people
overdraft protection
an automatic loan made to checking account customers to cover the amount of checks written in excess of the available balance in the checking account
Thomas bought a vehicle from a used-car dealer. He returned it to the dealer because the transmission fell out 150 miles after he purchased it. The dealer refused to accept the return because the vehicle was sold 'as is.' This is an example of a limited warranty.
false
Two years ago, Sean deposited money into a certificate of deposit and received a toaster. The value of the toaster reduced the amount of interest he earned for the first year.
false
When Brett's apartment lease ends, he should receive his entire security deposit back even though the carpet has been damaged while he was living there.
false
Warrant of Merchantibility
guarantees that the product is fit for the ordinary uses for which it is intended.
Prefabricated homes
have components built in a factory and then assembled at the housing site
family members may only charge interest they would have earned on the money
if they had deposited it in a SAVINGS ACCOUNT.
A secure loan
if u pledge property or other assets as collateral, u will probably receive a lower interest rate on u loan.
Title Insurance
insurance that, during the mortgage term, protects the owner or the lender against financial loss resulting from future defects in the title and from other unforeseen property claims not excluded by the policy
skimming
involves the recording of the data on the magnetic strip of a credit or debit card.
Mediation
involves the use of a third party to settle grievances.
substitution check
is a digital reproduction of the original paper check, and is considered a legal equivalent of the original check. (by Check Clearing for the 21st Century Act (known as Check 21)).
Service Contract
is an agreement between a business and a consumer to cover the repairs costs of a product.
discount point
is equal to 1 percent of the loan amount and should be viewed as a premium you pay for obtaining a lower rate
A credit rating
it is a measure of a person's ability and willingness to make credit payments on time. The factor that determine a person's credit rating r income, current debt, info about character, and how debts have been repaid in the past.
a credit score
it is a number that reflects the info in u credit report. The score summarizes u credit history and helps creditors predict how likely it is that u will repay a loan and make timely payments.
Variable interest rate
it is based on fluctuating rating in the banking system, such as the prime rate. With this type of loan, u share the interest rate risks with the lender. Thus, the lender may offer u a lower initial interest rate that it would with a fixed-rate loan.
The annual percentage rate (APR)
it is the % cost or relative cost of credit on a yearly basis.
capital
it is the borrower's assets that exceed liabilities.
capacity
it is the borrower's financial ability to meet the credit obligation.
The finance charge
it is the total dollar amount pay to use credit. It includes interest costs and sometimes other costs such as service charge, credit-related insurance premiums, or appraisal fees.
collateral usage in evaluating loans
it is used when u apply and sign for a loan, pledging some kind of property to secure the loan.
payment cap
keeps the payments on an adjustable-rate mortgage at a given level or limits the amount to which those payments can rise
Non-Deposit Institutions
life insurance companies, investment companies, brokerage firms, credit card companies, finance companies, mortgage companies
Non-Deposit Institutions are:
life insurance companies, investment companies, brokerage firms, credit card companies, finance companies, mortgage companies
Points
prepaid interest charged by the lender
condition
refers to the general economic condition that affect you ability to repay a loan.
Jim wants to make an offer to buy an older house. At this point, he should
set up a home inspection
single-family dwelling
shall mean single family per lot.
Full Warranty
states that a defective product can be fixed or replaced during a reasonable amount of time
Contingency Clause
stating the agreement is binding only if certain events occurs
Lessee
tenant
Negative Amortization
the amount of the home equity is decreasing instead of increasing
Payment Schedule
the amount paid monthly and the number of payments.
Warranty Deed
the seller guarantees the title is good. The document certifies that the seller is the true owner of the property, there are no claims against the title, and the seller has the right to sell the property
Arbitrator
the settlement of a difference by a third party whose decision is legally binding.
Arbitration
the settlement of a difference by a third party.
A shorter term
the shorter the period of time for which u borrow, the smaller the chance that smthg. will prevent u from repaying and the lower the risk to the lender. Thus, u may be able to borrow at a lower interest rate if u accept a shorter-term loan, but u payments will be higher.
Chapter 13 Bankruptcy
under this law, the debtor with a regular income proposes to pay his debt in a certain time in the future. He will keep all of his properties, and make installment payments to a trustee or representative. Most debtor do not pay the full amount of the debts. plan can be in effect for as many as 5 years