Fin 3030
Your ARM has a two year adjustment interval, 4% margin, 2% periodic rate cap and a 6% lifetime cap. This year the market interest index increased by 2.75%. What will happen to your APR on this loan? Select one: a. It will increase by 2% b. It will increase by 2.75% c. It will increase by 4% d. It will increase by 6%
A
A ________ mortgage is designed to let the homeowner pay off the mortgage early. Payments begin at the 30-year fixed rate, then increase each year. Select one: a. balloon payment b. growing equity c. shared appreciation d. graduated payments e. conventional
B
A situation in which the monthly payments are less than the interest that is due on the loan, and the unpaid interest is thus added to the principal is called Select one: a. partial amortization. b. negative amortization. c. reverse amortization. d. decaying amortization. e. None of these.
B
Another name for a closed-end lease is a(n) Select one: a. take-out lease. b. walk-away lease. c. end-purchase lease. d. terminal lease. e. None of these.
B
Which statement is true regarding direct unsubsidized loans? Select one: a. The federal government pays the loan's interest while the student is still in school. b. Such loans are made to undergraduate, graduate, and professional students. c. Students have to demonstrate financial need in order to receive the loans. d. All of these are true.
B
You are a newlywed, and you and your spouse have just found your dream home. Problem is, you do not have 20% for a down payment on the house. You will probably need to obtain Select one: a. EAR. b. PMI. c. PTI. d. APR. e. None of these.
B
You are examining two different MMMFs. Fund A is tax-exempt and pays 7%. Fund B is taxable and pays 9.5%. You live in a state that imposes no income taxes and you are in the 25% federal tax bracket. Which of these two alternatives is better? Select one: a. Find A is the better choice. b. Fund B is the better choice. c. Fund A and Fund B are equal so they both are a wise choice. d. Neither Fund A nor Fund B are wise choices.
B
You just received a loan from your banker to buy seed and plant your alfalfa field. The loan is a discount loan and is for $5,000 for 1 year and the quoted rate was 10%. What is your APR? Select one: a. 10.00% b. 11.11% c. 12.23% d. 14.33% e. None of these
B
Your brother, a banker, has just approved a loan for you, an add-on interest loan. You will borrow $2,000 for one year with a 12% annual interest rate. What is your monthly payment? Select one: a. $166.67 b. $186.67 c. $240.00 d. $256.78 e. None of these
B
________ is a publication that provides unbiased ratings and recommendations for a host of products and services Select one: a. USA Consumer b. Consumer Reports c. People Magazine d. Bloomberg Weekly
B
According to the Keown book, how does a consumer avoid predatory lending? Select one: a. Regulation b. Legal action c. Knowledge d. Steering
C
As a rule of thumb, your PITI costs shouldn't exceed ________ of your pretax monthly income. Select one: a. 8 percent b. 18 percent c. 28 percent d. 48 percent
C
Changes to your credit card policies and rates are usually announced via "________"; which are notices enclosed with your bill. Select one: a. bill addendums b. policy wards c. bill stuffers d. regal notices
C
Credit cards issued in conjunction with particular charities or organizations, like the Sierra Club or the Humane Society, that send a portion of their annual fee or percentage of their purchases back to the sponsoring organization are known as Select one: a. premium cards. b. prestige cards. c. affinity cards. d. secured credit cards.
C
Having completed a personal finance class, you are now ready to give some advice to your free-spending friends. Which one is unwise? Select one: a. Reduce the credit card balance. b. Resolve any billing errors. c. Quit using credit cards altogether. d. Look for trouble signs in credit card spending. e. Control your spending through discipline.
C
Hector and Maria Gonzales Hector a Maria have been married for almost one year now and are thinking about buying a house. Maria is an executive for a large, multi-national corporation with offices around the world. She has been told by her company that she will be transferred to a new location every three years. Hector is a car salesman and he is willing to move to wherever Maria gets transferred. Together they make $8,000 in gross monthly income and pay 40% in taxes and withholdings every month. Between them they have monthly payment of $400 in student loans and $700 in car loans, and their credit cards payments average $450 per month. They currently lease a luxury condo for $1,400 per month. They travel to Cancun every Christmas. Since they both work a lot of hours, they eat out at restaurants for most meals. They currently have nothing in savings but Hector's grandparents have said they will give them a 20% down payment for the new home. They have found a very nice town house available for $200,000. Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%, what will their PITI be? Annual property taxes are $2,400 and homeowner's insurance premium is $900 per year. Select one: a. $1,027.14 b. $1,283.93 c. $1,302.14 d. $1,558.93
C
Over the past decade, the number of new car sales are down and the number of new car leases are up. What is probably the main reason why this is true? Select one: a. The salesman makes a higher commission when cars are leased. b. The manufacturers prefer it when people lease instead of purchase. c. New cars are getting so expensive that the average person can't afford to buy them. d. Both The salesman makes a higher commission when cars are leased and The manufacturers prefer it when people lease instead of purchase are correct.
C
Private mortgage insurance typically is not needed with a down payment of 20% or larger. Why? Select one: a. Not true, all mortgage loans require PMI. b. Buyers who have large down payments don't choose the extra insurance. c. Buyers who invest large down payments are more motivated to make their mortgage payments. d. All of these e. None of these
C
Rhonda is buying a second home to use as income property. She is financing 75% of the home's $100,000 value. Her bank is loaning her the money for 10 years at an APR of 4.5%. How much are Rhonda's mortgage payments? Select one: a. $441.28 b. $598.74 c. $777.28 d. $958.44 e. $1,014.33
C
Steven is beginning a new job but has not yet been paid. He needs $400 to pay his rent this month. Steven is going to borrow the money through a Payday Loan establishment. They are charging him an $80 fee to borrow the money for 10 days until he receives his first paycheck. What is the actual interest rate that Steven is being charged? Select one: a. 7.3% b. 73.0% c. 730.0%. d. .073% e. None of these Incorrect
C
A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called a Select one: a. demand deposit. b. negotiable order of withdrawal deposit. c. term deposit. d. certificate of deposit. e. None of these are correct.
D
All of the following are advantages of renting versus buying a home except Select one: a. mobility. b. no property taxes. c. not responsible for home repairs or maintenance. d. control over remodeling and decorating decisions. e. no risk of falling housing prices.
D
When college students start saving early Select one: a. in an account earning interest, they immediately put their money to work. b. by automating their savings, they are less likely to spend money. c. they can take advantage of the time value of money and achieve their financial goals. d. All of these.
D
When do the payments on a Stafford Loan begin? Select one: a. When your school receives the money from the government b. When your loan balance gets over $5,000 c. You can choose when your payments begin anytime within 24 months of your graduation date. d. None of these is correct.
D
Which of the following statements would most correctly complete the following sentence? As the interest rate on a loan increases Select one: a. the loan maturity would decrease (other things held constant). b. the payment amount would decrease (other things held constant). c. the amoritization would increase (other things held constant). d. the payment amount would increase (other things held constant). e. None of these.
D
With a(n) ________ installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan. Select one: a. simple interest method b. partial amortization method c. discount method d. add-on method e. None of these
D
With a(n) ________ mortgage, you make relatively small monthly payments for several years, after which the loan comes due and you must pay it off in one large payment. Select one: a. growing equity b. option payment ARM c. interest only d. balloon payment
D
You are considering obtaining a mortgage of $220,000. A lower APR is available, but you must pay 2 points to buy the rate down. How much must you pay in dollars? Select one: a. $1,100 b. $2,200 c. $3,300 d. $4,400 e. $6,600
D
You have an option on an ARM that has a two-year adjustment interval, 4% margin, 2% periodic rate cap and a 6% lifetime cap. The current initial rate is 5.35%. You can also get a 30-year, fixed-rate mortgage for 6.65%. You plan on staying in this home for at least 10 years. What would be your best choice? Select one: a. Probably the ARM loan since your PITI would be lower. b. Probably the ARM loan since your PITI would be lower and the market rates of interest could get lower. Incorrect c. Probably the fixed-rate loan because your PITI will be lower. d. Probably the fixed-rate loan because it is easier to budget for and it is less risky for you.
D
A secured credit card is a good tool to help establish credit. Select one: True False
True
An assumable loan is one that can be transferred to a new buyer who simply takes over the loan obligations. Select one: True False
True
As a general rule, your PITI shouldn't exceed 28% of your pretax monthly income. Select one: True False
True
It's best to have an ARM with the longest adjustment interval available. Select one: True False
True
Smart buying means enjoying the highest standard of living that you can based on your income and budget. Select one: True False
True
Student loans are loans with federally subsidized interest rates given, based on financial need, to students making satisfactory progress in their degree programs. Select one: True False
True
The APR is larger when money is lent under the discount method than when it is lent under the simple interest method. Select one: True False
True
The National Credit Union Association is a federal agency that insures deposits at credit unions. Select one: True False
True
The prepayment privilege allows the borrower to make early cash payments toward the principal balance on their loan. Select one: True False
True
Under a Federal Direct Loan, you don't begin making payments until six months after graduation. Select one: True False
True
When you automate your savings you are less likely to spend those dollars because they never become part of the funds in your checking account. Select one: True False
True
When you use your debit card or ATM card, you should enter the transaction into your check register. Select one: True False
True
PITI stands for the total of your monthly principal, income, taxes, and insurance. Select one: True False
False
August's gross monthly income is $4,600. If according to the rule of 36 he can afford a maximum PITI of $1,125, what must his monthly consumer credit debt be? Select one: a. $531 b. $163 c. $417 d. $383
A
Candice is purchasing a new Jeep. She has the price negotiated down to what she thought was the lowest possible price until she heard that her Jeep has a holdback amount of 3%. Is it fair for Candice to ask the dealership to take the holdback amount off her final sales price? Select one: a. Absolutely, this would decrease the mark up price of the Jeep and save Candice additional dollars. b. No. The dealership would most likely lose money on the sale.
A
How much would the monthly payment be on a mortgage of $250,000 for 30 years at a rate of 6.0%? Select one: a. $1,498.87 b. $1,779.48 c. $743.66 d. $721.73 e. $1,450.03
A
In auto sales, a ________ is an amount of money, generally in the 2% to 3% range, that the manufacturer gives the dealer for selling an automobile. Select one: a. holdback b. rebate c. kickback d. markup e. None of these
A
Tran currently makes $4,500 per month in gross income. He has a student loan payment of $250 per month and a car loan of $450 per month. His credit card payments average $300 per month. What is the largest PITI he could qualify for with a reputable lender? Select one: a. $620 Correct b. $900 c. $1,260 d. $1,620
A
Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant? Select one: a. Home ownership b. A co-op c. A condo d. A rental unit
A
Congratulations! You have just agreed on the final price for your new car and now you have to finance the purchase. The negotiated price of the new car is $18,500 and you will receive $5,500 for your trade-in. What will your monthly payment be on a 48-month loan with a 7% APR? Select one: a. $281.25 b. $311.30 c. $385.42 d. $443.01
B
Kathy is buying her first home. She is financing a total of $185,000 at an APR of 5% for 25 years. How much are her monthly payments? Select one: a. $952.33 b. $1,081.49 c. $1,441.23 d. $1,664.85
B
Private mortgage insurance is designed to protect the Select one: a. borrower. b. lender. c. lien holder. d. All of these.
B
Which of the following is not a one-time fee connected with purchasing a house? Select one: a. Down payment b. Private mortgage insurance c. Closing costs d. Points e. Origination fee
B
Which of the following is not a recurring housing cost? Select one: a. Mortgage payments b. PITI c. Points d. Maintenance and operating costs e. Homeowner's insurance
C
Bob and Mary Kay have gross household income of $7,000 per month. They both have great credit scores and the home they are interested in buying appraised higher than the selling price. They have combined monthly debt payments of $300 in student loans, $650 in car loans, and they pay their credit cards in full every month. The PITI on the new home will be $1,800 per month. Before they pay the $250 loan application fee, they are asking you for your opinion on whether they will get approved for a mortgage. What will you advise them? Select one: a. Based on the 28 percent rule they can afford the $1,800 PITI and will be approved for the mortgage. b. Based on the 28 percent rule they cannot afford the $1,800 PITI and will be denied the mortgage. c. Based on the 36 percent rule they will be approved for the mortgage. d. Based on the 36 percent rule they have too much other debt and will be denied the mortgage.
D
A simple interest installment loan calculates interest on the unpaid balance. An add-on Select one: a. calculates the same way with the addition of a factor. b. calculates interest on the original balance. c. is less costly. d. is more costly. e. both calculates interest on the original balance and is more costly.
E
Abraham is buying a new truck. The sale price for the truck is $23,410. His bank is loaning him the money at an APR of 6.5 for 5 years. How much will Abraham's monthly truck payment be? Select one: a. $229.36 b. $375.88 c. $307.65 d. $402.35 e. $458.04
E
Whether or not you itemize your tax deductions, you reap tax benefits due to the tax deductibility of the interest payments on your mortgage. Select one: True False
False
Daniel is due to receive the balance of his trust fund in 5 years; as a result he has taken out a(n) ________ mortgage where he has made small payments for several years and will pay off the balance in one large payment with his trust funds. Select one: a. ARM b. graduated payment c. shared appreciation d. fixed rate e. balloon payment
E
Which of the following factors plays a role in determining the monthly lease payment of a car? Select one: a. The agreed-upon price of the vehicle b. The length of the lease c. Your down payment plus any trade-in allowance or rebate d. The value of the vehicle at the end of the lease e. All of these
E
From a borrower's perspective, you're better off with an ARM if interest rates rise. Select one: True False
False
Most predatory lenders offer prepayment privileges with their mortgages. Select one: True False
False
Open-end leases are leases in which you return the vehicle at the end of the lease and you have no further responsibilities. Select one: True False
False
Credit scoring is Select one: a. quite expensive for the lender. b. not a flawless method of determining creditworthiness. c. an inefficient but necessary process. d. All of these.
B
Bradley Clemons Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance. What is the APY on Bradley's default, or penalty, rate? Select one: a. 33 percent b. 33.50 percent c. 38.48 percent d. 42.96 percent
C
Many lenders use the 28/36 rule in evaluating mortgage applications. If your mortgage payment itself is 28% of your gross income, that means that the remainder of your monthly debt must be ________% or less. Select one: a. 6 b. 7 c. 8 d. 28 e. 36
C
Many lenders will hold Dave to the 28/36 rule in evaluating his application for a mortgage. What does the 36 mean? Select one: a. A down payment of 36 months is required. b. A down payment of 36% is required. c. Debt payments including mortgage must be less than 36% of his gross monthly income. d. Debt payments must be less than 36% of his monthly take-home pay. e. Mortgage insurance is required during the first 36 months of the loan.
C
Suppose that you are interested in buying a home, but are unsure of how much you can afford. What is the best way to determine your prospects for obtaining a mortgage? Select one: a. Calculate your debt limit ratio. b. Figure the 28/36 rule. c. Determine what your mortgage payment will be. d. Determine what your income taxes will be. e. Both Figure the 28/36 rule and Determine what your mortgage payment will be are correct answers.
E
Non-profit Credit Counselors should be avoided due to their high fees. Select one: True False
False
The two most common types of two-step mortgages are the 8/22 and 12/18, in which lenders offer a lower interest rate for the first 8 or 12 years and then adjust the rate for the remaining 22 or 18 years. Select one: True False
False
There is no cash advance fee when you use your credit card at an ATM machine. Select one: True False
False
Consumer loans can range from unsecured, fixed-rate, single-payment loans to secured, variable-rate, installment loans. Select one: True False
True
Crystal tried to use her Macy's credit card at Target but was unsuccessful because her Macy's credit card is a single-purpose card and can only be used at Macy's. Select one: True False
True
Due to compounding frequency, the actual interest rate or APY you pay is higher than the advertised interest rate or APR. Select one: True False
True
For a consumer who does not have a checking account a prepaid debit card is a means of paying for goods and services. Select one: True False
True
The deregulation of the 1980s has allowed brokerage firms to offer traditional banking services, and has also let banks offer services formerly found only at investment companies. Select one: True False
True
Neal's life insurance policy has a cash value of $100,000. He wants to purchase a second home to rent out. How much can Neal borrow against the surrender value of his life insurance policy? Select one: a. $50,000 b. $75,000 c. $95,000 d. $100,000
C
Leon is 28 years old and pays cash for everything he buys. He has never had credit in his name and never missed or been late on any bills he has ever had. He recently went online to check what his credit score was. Where do you think his credit score would be? Select one: a. over 800 b. between 700 and 799 c. between 600 and 699 d. None of these
D
One of the following lists constitutes the five Cs of credit. Select the correct one. Select one: a. Character, capacity, capital, collateral, characteristics b. Character, capacity, capital, collateral, co-insurance c. Character, capacity, capital, collateral, careful d. Character, capacity, capital, collateral, conditions e. Character, capacity, capital, collateral, credence
D
What happens when you default on a car loan where your Title is held as collateral? Select one: a. You damage your credit history but you keep the car. b. You lose the car and damage your credit history. c. You face liability under the deficiency payments clause. d. Only choices You lose the car and damage your credit history and You face liability under the deficiency payments clause are correct. e. All of these choices are correct.
D
Your credit card company is required to send you a notice 45 days before they can increase your interest rate, change certain fees (such as annual fees, cash-advance fees, and late fees), or make other significant changes to the terms of your card. Select one: True False
True
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act established fee caps for cards. Card fees cannot total more than ________ of the initial credit limit. Select one: a. 25 percent b. 40 percent c. 45 percent d. 60 percent
A
A short-term loan that provides funding until a longer-term loan can be secured is called a(n) Select one: a. bridge loan. b. gap loan. c. straddle loan. d. amortized loan.
A
Jerome Hanesworth Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Based on his credit card usage, which of the following aspects of a credit card should be most important to Jerome? Select one: a. The APR on the unpaid balance b. A low annual fee c. Perks and benefits, like frequent flier miles d. None of these are important to Jerome.
A
Jerome Hanesworth Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Jerome would be considered a Select one: a. credit user. b. convenience user. c. combination credit and convenience user. d. T&E card user.
A
Money Market Deposit Accounts enjoy one advantage over savings accounts found in commercial banks. This advantage is Select one: a. a variable rate that is generally higher. b. lower fees and smaller minimum balances. c. greater liquidity. d. unlimited check-writing privileges.
A
Roxanne has always maintained an excellent credit rating over the years. She has an annual income of $23,000, has lived at her current residence three years, and has worked at the same job for eight years. Susan works in a clerical position, has two credit cards and maintains two bank accounts. Which one of the following items of evaluation would Roxanne score the highest on? Select one: a. Employment history b. Annual income c. Length of residence d. All of these are correct answers.
A
When you withdraw cash from an ATM using your credit card Select one: a. you begin paying interest immediately. b. you are not charged any interest until after the date the payment is due. c. the interest fee is lower than that for purchases. d. you're using a relatively inexpensive way to borrow money.
A
Which method sums the outstanding balances owed each day during the billing period and divides by the number of days in the period? Select one: a. Average daily balance b. Previous balance c. Adjusted balance d. Balance calculation method e. Simple interest
A
Which of the following does not require you to have a good credit rating to issue you a loan? Select one: a. Your family b. Savings and loan c. Commercial bank d. All of these require a good credit rating to issue a loan.
A
A loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a(n) Select one: a. fully amortized loan. b. balloon loan. c. installment loan. d. secured loan. e. None of these. Feedback
B
Bradley Clemons Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance. If Bradley buys a new game console for $560 this month and sends in a credit card payment of $950 when he gets his statement, how much interest will he pay on the game console for the month? Select one: a. 21 percent b. 1.75 percent c. 3 percent d. None, since he paid for the game console in full during the grace period.
B
Brenda White had her bank certify one of her personal checks as being good. Which type of check has been issued? Select one: a. Traveler's check b. Certified check c. Cashier's check d. Money order e. Audited check
B
Cash and investments that can be easily converted into cash are termed Select one: a. capital assets. b. liquid assets. c. illiquid assets. d. depositable assets. e. None of these are correct.
B
Debt consolidation loans are very appealing because Select one: a. they offer liquidation to those who are in good standing with their creditors. b. they offer hope to those who can't keep up with their current payment schedules. c. they offer relinquishment of all debts and financial obligations to those who can't keep up with their current payment schedules. d. All of these
B
Josh was sued by his former business partner. He lost the case and has to pay his former partner $10,000. He has not yet done so and is refusing to do so. Josh is applying for a mortgage for a new home. Should he be worried about the lawsuit impacting his mortgage application? Select one: a. No, this kind of information is not contained on one's credit report. b. Absolutely, this kind of information is contained on one's credit report.
B
Research has determined that undergraduate college students tend to behave in similar manners with regards to their credit card usage. As noted in Chapter 6, which of the following behaviors are indicative of undergraduate students' credit card behaviors? Select one: a. Their parents do not frequently pay their credit card balances for them. b. They make more than their minimum payment each month but still tend to carry a balance on their cards. c. They pay off all of their cards in full each month. d. They make more than the required minimum payment on 90% of all other cards each month.
B
Sharry is interested in buying her first home. Currently her monthly gross income is $3,000. From this she makes a car payment of $240, a personal loan payment of $300 and a student loan payment of $85. Based on this information would a bank approve Sharry for a mortgage? Select one: a. Yes b. No
B
The ________ is the automatic repayment plan with a 10-year term. Select one: a. extended repayment b. standard repayment c. income-based repayment d. graduated repayment
B
When borrowing for college, one thing to keep in mind is that you're not just paying for one year of school. About half of all colleges practice what is called "front loading of grants," which means that Select one: a. grants awarded in the fall will be worth more than grants awarded in the spring semester. b. your grants as a freshman will be more generous than your grants as a sophomore, junior, or senior. c. your grants will progressively increase as your graduation date approaches. d. the more your parents or guardians pay upfront for your college expenses, the less grants you will receive.
B
Which of the following financial institutions were originally established to provide mortgage loans to depositors? Select one: a. Commercial banks b. Savings and loan associations c. Internet banks d. Credit unions
B
Which of the following is the correct formula to calculate the after-tax cost of a home equity loan? Select one: a. After-tax cost of a home equity loan = before-tax cost (1 + marginal tax rate) b. After-tax cost of a home equity loan = before-tax cost (1 -marginal tax rate)
B
Which of the following statements regarding the risk-return relationship is most accurate? Select one: a. Lower credit scores are associated with lower APRs. b. Higher credit scores are associated with lower APRs. c. Longer loan length is associated with lower APRs. d. Shorter loan length is associated with higher APRs. e. Both Higher credit scores are associated with lower APRs and Shorter loan length is associated with higher APRs are correct.
B
A Chapter 13 personal bankruptcy is characterized by all of the following except Select one: a. you continue to pay at least a portion of most of your debts. b. you maintain title and possession of your assets. c. your creditors vote on restructuring your debt repayments. d. a new debt repayment schedule is determined. e. you get relief from harassment by bill collectors.
C
A(n) ________ loan calls for the repayment of both the interest and the principal at regular intervals and is commonly referred to as loan amortization. Select one: a. term b. simple interest c. installment d. personal e. None of these
C
Alice has fallen behind on her signature loan. She recently received a notice from the lender that her wages were going to be garnished to pay off the debt. What is the loan clause that allows the lender to take this action against Alice because she was in default? Select one: a. Recovery clause b. Default clause c. Recourse clause d. Deficiency payments clause e. None of these
C
Monty Head Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR. What is the APY on Monty's default or penalty rate? Select one: a. 36% b. 36.99% c. 42.58% d. 48.66%
C
Of the following possible sources of credit, which typically has the lowest borrowing rates? Select one: a. Savings and loans b. Personal finance company c. Credit union d. Commercial bank
C
Pick the advantage of a certificates of deposit from this list of possibilities. Select one: a. The interest paid is compounded daily. b. Early withdrawals after 30 days do not incur a penalty. c. Interest rates are generally higher than typical savings accounts. d. They earn the APY and not the APR.
C
Susan Harris Susan has always maintained an excellent credit rating over the years. She has an annual income of $63,000, has lived at her current residence thirteen years, and has worked at the same job for eight years. Susan works in a clerical position, has two credit cards and maintains two bank accounts. Susan is very conservative and has all of her savings ($12,000) in a NOW account at her local bank. One of her credit cards has a balance of $550 and has an APR of 23%. Susan has been making monthly minimum payments on the credit card. Out of curiosity she would like to know how her credit card companies judge her creditworthiness and what she can do to improve her financial situation. Susan is not married and a female. Which of the following Consumer Credit Laws prohibits credit discrimination on the basis of her status? Select one: a. The Truth in Lending Act b. The Fair Debt Collections Practices Act c. The Equal Opportunity Act d. The Fair Billing Act
C
The ________ provides a single location for financial protection and oversight-and its mandate is to help consumers make better decisions. Select one: a. Center For the People Bureau (CFPB) b. Consortium of Fiscal Protection Bureau (CFPB) c. Consumer Financial Protection Bureau (CFPB) d. Consumer Fiscal Protocol Bureau (CFPB)
C
What is the name of the interest rate banks charge to their most creditworthy customers? Select one: a. Main rate b. Blue chip rate c. Prime rate d. Premier rate e. None of these
C
What is the type of loan where the entire interest charge is subtracted from the loan principal before you receive the money, and at maturity you repay the entire principal? Select one: a. Simple interest method b. Partial amortization method c. Discount method d. Add-on method e. None of these
C
When you are considering different investment options and want to maximize your returns, be sure to compare the investments' Select one: a. quoted rates. b. APRs. c. APYs. d. None of these
C
Which of the following is not a common fee arrangement for checking accounts? Select one: a. Monthly fee b. Minimum balance requirement c. Variable interest rates to reflect fee activity d. Charge per check e. Balance-dependent scaled fees
C
You are considering the purchase of one of two different investments. Investment A is tax exempt and pays 6%. Investment B is taxable and pays 8.33%. You live in a state that imposes no income taxes and are in a 28% federal tax bracket and want to earn the highest after tax return possible. Which of the following is true? (round to two decimal places) a. Investment A is preferred. b. Investment B is preferred. c. Investments A and B have identical after tax yields. d. Investments A and B have identical APYs. e. Not enough information has been provided.
C
________ is when a borrower is allowed to temporarily stop making student loan payments for a qualified reason such as an illness, financial hardship, or serving in a medical or dental internship or residency. Select one: a. Deferment b. Delinquency c. Forbearance d. Default
C
Christopher Garcia Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. What recommendations would you give Christopher concerning his cash management? Select one: a. Create a budget and set some savings goals. b. Automate a savings plan using EFT. c. Set up an account at a mutual fund company. d. All of these are good recommendations. e. All of these except Set up an account at a mutual fund company are good recommendations.
D
How do you compare cash management alternatives to determine which is best for you? Select one: a. Compare returns using comparable interest rates. b. Take into account their tax status. c. Consider their safety or risk. d. All of these are correct.
D
Jerome Hanesworth Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Most likely, Jerome is Select one: a. unaware of how much of his payments go toward interest. b. not getting the benefits of a grace period. c. obligating his future income. d. All of these are correct.
D
John and Maile Johnson The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover short-term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. The Johnsons have been thinking about the financial principle -Pay Yourself First. Being very conservative, they might consider having their bank Select one: a. sell them a risky mutual fund. b. send them a monthly reminder to make a deposit in their 401(k). c. do a direct deposit of John's paycheck into their checking account. d. do a direct deposit of some of John's paycheck into a savings fund.
D
John and Maile Johnson The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover short-term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. What financial principle do they need to understand better? Select one: a. The time value of money b. Taxes affect personal finance decisions. c. Risk and return go hand in hand. d. All of these are important to their situation.
D
Please choose the method to use when calculating the after-tax return. Select one: a. Taxable return (1 + marginal tax rate) -nontaxable return b. Taxable return (marginal tax rate -1) -nontaxable return c. Nontaxable return (1 -marginal tax rate) + taxable return d. Taxable return (1 -marginal tax rate) + nontaxable return e. Nontaxable return (1 + marginal tax rate) -taxable return
D
Typically, an annual fee charge ranges from $10 to $100, but the American Express Centurion Card charges a ________ annual fee-and there's also a ________ initiation fee for the first year. Select one: a. $0; $0 b. $25; $75 c. $250; $750 d. $2,500; $7,500
D
An advantage that direct or subsidized student loans have over other types of loans is Select one: a. the after-tax interest rates are very attractive compared with other loans. b. you can borrow at a below-market rate, regardless of your credit situation. c. in an emergency, you can declare bankruptcy and avoid repayment. d. you have the rest of your life to pay it back. e. both the after-tax interest rates are very attractive compared with other loans and you can borrow at a below-market rate, regardless of your credit situation are correct.
E
Christopher Garcia Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day-to-day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. What recommendations would you give Christopher about his goal of buying a house in five years? Select one: a. You don't have enough income to consider buying a house. b. You need to develop a savings plan. c. You need to estimate what a down payment would be. d. You should switch to a Savings and Loan Association. e. Both You need to develop a savings plan and You need to estimate what a down payment would be are good answers.
E
What can a couple seeking to get out of debt do? Select one: a. Avoid future use of credit card debt, except on a emergency basis. b. Use savings to pay off current debt. c. See if their creditors will restructure their loans. d. Seek help from a reputable credit counselor. e. All of these are correct.
E
What rights would a college friend of yours have whose credit card application was denied? Select one: a. The right to view her credit report b. The right to have the file be accurate c. The right to point out errors in her file d. The right to request mistakes in the file be corrected e. All of these are correct answers.
E
When using an ATM, keep in mind that a. computer errors can occur. Incorrect b. it is never safe to deposit cash in an ATM. c. you should report electronic transaction mistakes to the bank immediately. d. human problems in handling the transactions can occur. e. All of these are correct.
E
Which of these are possible options for most people who cannot pay their bills? Select one: a. Get help from a credit counselor. b. Obtain a debt consolidation loan. c. Declare Chapter 13 personal bankruptcy. d. Declare Chapter 7 personal bankruptcy. e. All of these are possible options.
E
A balloon loan calls for repayment of both interest and principal at regular intervals, with the payment levels set so that the loan expires at a preset date. Select one: True False
False
A store-valued card, only used at one store for one purpose, is known as an "open-loop" card. Select one: True False
False
Brick-and-mortar banks typically offer superior interest rates for borrowers and savers. Select one: True False
False
Credit card issuers are free to set up shop near large university campuses and offer free gifts-anything from free or discounted flights to free Frisbees. Select one: True False
False
If your before-tax cost of a home equity loan is 12 percent and you are in the 30 percent marginal tax bracket, your after-tax cost of the home equity loan is 9 percent. Select one: True False
False
It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future. Select one: True False
False
Only a Credit Repair company can remove inaccurate data from your credit report. Select one: True False
False
The APY can never be the same as the APR. Select one: True False
False
If you only use your debit card and ATM card and rarely write paper checks, overdraft protection is still a good thing to have. Select one: True False
True
Liquid assets allow you to cover unplanned expenses without having to interrupt your long-term investments or liquidate any tangible assets. Select one: True False
True
Overdraft protection is an automatic loan made to your checking account whenever your account does not contain enough cash to cover the checks that you have written against it. Select one: True False
True
The annual percentage rate is the simple percentage cost of all finance charges over the life of the loan on an annual basis. Select one: True False
True