Personal Finance Exam 2

What would be the interest cost (simple interest) for a $2,000 loan with a 6% rate for a half of a year?

$60

Rank the following items in the order they should be completed to dispute a billing error.

1. Write a letter of complaint 2. Purchase placed in dispute 3. Receive an acknowledgement from the credit company 4. Purchase removed or credit issued to account

Which of the following is the ideal, not maximum, debt payment-to-income ratio?

15%

You are in the 25% tax bracket. So, the yield on the savings account is 8%, and the after-tax savings rate of return is ______.

6%

Fraud charges on a debit card should be reported within days of receiving your statement to protect your right not to be charged for the transaction.

60

You are in the 25% tax bracket, the before-tax savings rate of return is 12%, the after-tax yield on the savings account is:

9%

Actions you might take when you encounter difficulties with a banking app include:

Contact customer service for the bank or app Make sure that you are using the correct username and password Update app and phone software

The law that protects consumers by setting standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise is called the ______.

Fair Credit Billing Act

Which of the following automobile driving costs are categorized as variable operating costs?

Gas Parking costs and tolls Repairs Oil

Select the bonds that are a type of federal savings bond.

I EE

Which of the following automobile driving costs are categorized as fixed ownership costs?

Interest on car loans Registration fees Depreciation Insurance

What does the Fair Credit Billing Act (FCBA) do?

It protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise.

___________ is the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees.

Liquidity

What are ways to protect against credit card fraud?

Shred anything with your account number on it. Don't give your card number over the phone unless you initiate the call. Reviewing your billing statements.

If you purchase a new but defective item that the business will not accept as a return, what does the FCBA require?

The credit card company will allow you to withhold payment on such an item because it is defective.

A regular savings account usually offers:

a low or no minimum balance requirement.

What is a credit bureau?

a reporting agency that collects information on how promptly people and businesses pay their bills

A prearranged amount of money that is accessed with special checks is called:

a revolving check credit. a bank line of credit.

If a 10 pound bag of dog food sells for $6.99, what is the per unit cost of the dog food?

about $0.70 cents per pound

A line of credit is:

an open-end type of credit that the lender makes available to the borrower.

Which of the following is generally considered to be expensive sources of loans?

appliance companies bank credit cards finance companies department stores

Share draft accounts at a credit union:

are interest bearing.

Dealing with the person who has the __________ to give you a lower price is a vital factor of negotiations.

authority

Use a debit card to:

avoid an annual fee. avoid bills to be paid in the future. avoid possible interest charges. obtain better fraud protection.

When comparing savings accounts rates of return, you should choose one that:

beats the rate of inflation.

A savings plan that requires a certain amount of money to be left for a specified amount of time, subject to penalty for early withdrawal, is called a ______.

certificate of deposit

The savings alternative that offers less liquidity is:

certificates of deposit.

The common sources of information regarding products during the preshopping phase include personal _______, media, and independent testing agencies such as Consumer Reports.

contacts

Consumers that pay off the balance each month are called ______.

convenience users

The APR is the best indicator of the true _____ of credit.

cost

Product label on appliances includes information on operating ________, to assist you in selecting the most energy-efficient models.

costs

Overdraft protection is designed to:

cover underfunded checks.

The three types of credit insurance are:

credit accident and health. credit property. credit life.

An example of open-end credit is:

credit cards

The most commonly purchased type of credit insurance is:

credit life insurance

If you cannot make a payment on a debt when due, contact the _________ at once to work out a modified payment plan.

creditors

Using savings for ________ living expenses is one of the mistakes people make when managing current cash needs.

current

Financial services include all of the following except:

debt counseling.

Use a credit card to:

delay the payment for a purchase. buy online for large purchases. build credit history.

The factors that influence the price of a used car include ______.

demand for the model features and options number of miles condition

A ________ ticket or slip is used to add funds to a bank account

deposit

The loss of a vehicle's value due to time and use and the largest fixed cost of a new car is called

depreciation

The typical _________-related fraud works by soliciting charitable donations for phony efforts.

disaster

The Fair Debt Collection Practices Act Blank______ to creditors that collect debts themselves.

does not apply

The Truth in Lending law of 1969 requires lenders to state the cost of borrowing as a specific ________ amount so that consumers know exactly what the credit charges are.

dollar

Which of the following are personal factors that could affect your daily buying habits?

education gender age occupation

Which of the following is something that the Equal Credit Opportunity Act designed to do?

ensure that persons are not discriminated against because of their race ensure that persons are not discriminated against because of their sex ensure that persons are not discriminated against based upon their age

At the end of a car lease, if the market value of the car is less than the residual value, you may be able to sell the car for a profit.

false

One of the factors that influences the price of buying a used car is capitalized cost

false

The monthly payment is the best indicator of the true cost of a car loan.

false

Achieving your financial goals and carrying out your daily activities require many _________ services.

financial

Financial services include:

financial planning. payment services. insurance. savings. borrowing. investments.

Depreciation is the largest Blank______ cost of a new vehicle.

fixed

A certified check is a personal check with ______.

guaranteed payment

Drawbacks of money market accounts include:

higher minimum balance required. some institutions charging for low balances.

Financial services will usually not be affected by:

historically lowest consumer prices.

Purchasing a house for your growing family is an example of how credit can be used advantageously because doing so:

increases your overall well-being.

All of the following are deposit-type institutions that serve as financial intermediaries except:

insurance companies.

The rule of 78s formula favors ______.

lenders

A credit limit can also be called ______.

line of credit

A common trade-off (opportunity cost) for financial services includes having to keep money in accounts longer to obtain higher interest rates. This leads to reduced ______.

liquidity

In a(n) _______ process, a third party tries to settle a grievance, but the process is nonbinding.

mediation

By comparing financial institutions, a customer can:

minimize ATM fees. lower bank fees.

A ______ fund is an account used for savings offered by investment companies.

money market

Two situations when you should avoid credit are: when you don't _______ or really want the purchase, and when you could pay cash but choose to finance the needed item.

need

The difference between the sticker price and the dealer's cost is usually the range available for ______.

negotiation

Closed-end loans are _______ loans repaid within a(n) ______ time frame with equal payments.

one-time; specific

Some things to consider when selecting your financial institution include:

online banking. fees and charges. services offered. convenience.

The information on the label of some food products includes dating that helps the consumer determine freshness.

open

A savings plan that requires a certain amount of money to be left for a specified amount of time is not a:

passbook savings account. money market account. stock option.

The new Credit CARD Act requires creditors to include a warning on the monthly statement about making only the minimum

payment

Annual ________ rate is the yearly interest rate quoted by a financial institution on a loan.

percentage

There are several reasons that you should borrow from a credit union, including their patience in dealing with borrowers who have good reasons for missed payments, and they provide ________ service.

personalized

A credit counseling organization usually provides credit management classes and helps you devise a credit management

plan

The five Cs refer to:

policies that help determine who will receive credit.

Products such as real estate or automobiles may be purchased using ______ negotiation.

price

Bankruptcy is the legal process by which a person, business, or government entity unable to meet financial obligations is:

relieved of those debts by a court.

The rate of _ ______is the percentage increase in the value of savings as a result of interest earned.

return

A bank line of credit is also known as ______.

revolving check credit

What types of financial institutions have federal deposit insurance through FDIC?

savings and loans commercial banks

A money market fund is a ______.

savings instrument

An express warranty is usually in writing, is created by the ______ or manufacturer, and has two forms: _______ warranty and limited warranty.

seller; full

A limited warranty covers only certain aspects of the product and requires the buyer to pay part of the costs for:

shipping or repairs.

What are the three types of closed-end credit?

single lump-sum credit installment sales credit installment cash credit

Lifestyle, interests, hobbies, and peer group are all _______ factors that affect your buying decisions.

social

The range of negotiation is determined with a new car by knowing the _______ price and the _______ cost.

sticker; invoice

The Act that prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts is:

the Truth in Lending Act.

You are considering a car with no down payment and monthly payments of $350 for 48 months and an estimated value at the end of the loan term of $4,000. A comparable model can be leased for $325 a month for 36 months with end-of-lease costs of $1,400. Which arrangement should you choose?

the loan and purchase because its cost is lower.

A car with a total purchase price of $12,000 is available, while a comparable model can be leased for $350 a month for 36 months with end-of-lease costs of $800. Which arrangement should you choose?

the outright purchase because its cost is lower

Simple interest (I) is calculated as follows: Principal × Rate of Interest ×

time

A method to confirm that you can pay for the loan is:

to have enough take-home pay to cover monthly expenses, the loan payment and other expenses.

To calculate the debt payments to income ratio:

total monthly debt payments (excluding home mortgage) are divided by net monthly income.

A credit bureau is a reporting agency that collects credit and other information about consumers.

true

Achieving your financial goals and carrying out your daily activities require various financial services.

true

Credit cards are convenient, but not always better, to use than installment debt because of the latter's application process and procedures; but that ease of use can lead to overuse.

true

The rule of 78s is a mathematical formula to determine how much interest has been paid at any point in a loan.

true

Well-maintained and certain high-quality vehicles depreciate at slower rates than vehicles not receiving the same level of care or not consisting of the same high quality.

true

Banks, credit ________, and consumer finance companies are all businesses that are sources of car loans.

union

Common mistakes made when managing current cash needs include:

using savings for current expenses overspending lacking sufficient funds

Which of the following is part of the billing dispute process?

writing a letter to the creditor