Personal Finance F260 Exam II Practice

Maximum Loan Amount= Maximum Loan Available=

% Can Borrow * Market Value Maximum Loan Amount - Current Mortgage Balance

What is the debt payments-to-income ratio recommended limit?

20%

A certificate of deposit is also known as a demand deposit.

False

An escrow account is designed to reduce the cost of a mortgage.

False

If you declare a Chapter 7 bankruptcy, you do not have to pay alimony, child support, or educational loans.

False

Mediation involves a legally binding decision by a third party to solve a consumer complaint.

False

Representation by a lawyer is usually required in small claims court.

False

The more frequent the compounding, the less a person will earn on a savings account.

False

There are no costs involved in filing for a bankruptcy.

False

When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance.

False

With closed-end credit, loans are made on a continuous basis and you make at least a partial payment each billing period.

False

Finance Charge=

Interest + Other Costs

Annual Percentage Yield=

Interest/Principal

Annual Opportunity Cost=

Minimum Balance * Interest Rate

Cash Advanced Fee=

Rate * Principal Borrowed

Recovery Time=

Refinancing Cost / Monthly Savings

What factors influence the type of housing a family will select?

Selection of housing is influenced by an individual's or family's needs, desires, attitudes, and lifestyle, as well as with his/her life situation and financial factors.

Explain simple interest.

Simple interest is the interest computed on principal only and without compounding. It is the dollar cost of borrowing money. The simple interest formula is: Interest = Principal × Rate of interest × Time (I = P × r × T).

What are the common sources of consumer information?

Sources of information for use when making buying decisions include personal contacts (family and friends), business organizations (advertisements, product labels, and packaging), media sources (newspapers, magazines, television, websites, and radio), independent testing organizations, and government agencies.

A deed is the document that transfers ownership of the property from one party to another.

True

A lease provides protection to both the tenant and the landlord.

True

A payment cap keeps the payments on an adjustable-rate mortgage at a given level or limits the amount to which those payments can rise.

True

Advertising is a type of consumer information commonly provided by business organizations.

True

Although credit allows more immediate satisfaction of needs and desires, it does not increase total purchasing power.

True

An asset management account combines a complete financial services program for a single fee.

True

Consumer credit dates back to colonial times.

True

Credit, when effectively used, can help you have more and enjoy more.

True

Home improvements may or may not increase the selling price of the home.

True

In a Chapter 13 bankruptcy, the debtor normally keeps all or most of his or her property.

True

Installment sales credit is a loan that allows you to receive high-priced items, such as large appliances or furniture.

True

It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying a large amount of cash.

True

Negotiating a purchase price for a home can involve an offer and a counteroffer.

True

Open dating information provides consumers with information about the freshness of a perishable product.

True

Prepaid interest may be a part of a mortgage agreement.

True

Real estate advisors suggest a price-to-rent ratio of 18 or lower when you buy to possibly avoid a lower home value after your purchase.

True

The first phase in the buying process involves information gathering.

True

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions.

True

Two key concepts that you should remember when borrowing are the finance charge and the annual percentage rate.

True

Unit pricing uses a standard unit of measurement to compare the prices of packages of different sizes.

True

You have the right to file your own bankruptcy case and represent yourself at all court hearings.

True

When are you living within your means?

When you debt-payment to income ratio is less then 20%

The debt-to-equity ratio is less than the upper limit of debt obligations when...

debt-to-equity ration is less than 1