PFP Midterm Part 2

Demand deposit products fall within what major type of financial services? Selected Answer: Cash availability and payment services Answers: Savings Cash availability and payment services Borrowing Investments and other financial services Response Feedback: The ability to transfer money to others is a necessary part of daily business activities Checking accounts and other payment methods are commonly called demand deposits.

Cash availability and payment services

The options for declaring personal bankruptcy are the following Selected Answer: Chapter 7 Straight Bankruptcy or Chapter 13 Wage Earner Plan Bankruptcy Answers: Chapter 7 Straight Bankruptcy or Chapter 11 Personal Bankruptcy Chapter 7 Straight Bankruptcy or Chapter 11 Wage Earner Plan Bankruptcy Chapter 7 Straight Bankruptcy or Chapter 13 Wage Earner Plan Bankruptcy Chapter 7 Wage Earner Plan Bankruptcy or Chapter 13 Straight Bankruptcy

Chapter 7 Straight Bankruptcy or Chapter 13 Wage Earner Plan Bankruptcy

When a lender considers a potential borrower's credit report and their credit score, which one of the five C's of credit are they concerned with? Selected Answer: Character Answers: Character Capacity Capital Collateral

Character

When lenders consider credit-worthiness of applicants, they consider the Five Cs of Credit Management. What are they? Selected Answer: Character; Capacity; Capital; Collateral; Conditions Answers: Character; Capacity; Capital; Collateral; Conditions Character; Capacity; Capital; Collateral; Clarity Cash; Capacity; Capital; Collateral; Conditions Cash; Credibility; Capacity; Capital; Collateral

Character; Capacity; Capital; Collateral; Conditions

If you think your credit card bill is wrong, or you want some more information about it, the first step you should take is.... Selected Answer: Contact your creditor Answers: Contact the Fair Credit BIlling Act (FCBA) Federal Agency Contact your creditor Contact one of the credit reporting agencies (Equifax, Transunion or Experian) Contact your state representative

Contact your creditor

Credit insurance is any type of insurance that ensures repayment of a loan in the event the borrower is unable to repay it. All of the following are types of credit insurance EXCEPT Selected Answer: Credit card insurance Answers: Credit life insurance Credit card insurance Credit accident and health insurance Credit property insurance

Credit Card Insurance

Among the following choices, you are most likely to find a medium to low cost loan from what type of institution? Selected Answer: Credit Union Answers: Finance Company Credit Union Payday lender Tax refund lender

Credit Union

There are a number of federal consumer credit protection laws that are administered by federal agencies, intended to protect the consumer. If you think you can prove that a creditor has discriminated against you because of your race, gender or age, you may have a case that the creditor has violated what credit law? Selected Answer: Equal Credit Opportunity Act Answers: Truth in Lending Act Equal Credit Opportunity Act Fair Credit Billing Act Consumer Credit Reporting Reform Act

Equal Credit Opportunity Act

Personal Bankruptcy is an easy way out, and allows a consumer to erase all their debts with very little consequences for their financial future.

FALSE

Financial Institutions have to meet regulatory requirements in order to be able to accept deposits. All the following financial institutions accept deposits EXCEPT Selected Answer: Finance Companies Answers: Commercial Banks Finance Companies Credit Unions Savings and Loan Associations Response Feedback: Deposit institutions include: Commercial banks, S&Ls, mutual savings banks and credit unions.

Finance Companies

A credit union customer is most likely to benefit from... Answers: Latest digital banking services Extensive, national branch and ATM network Correct Higher savings rates, lower fees All of the above

Higher savings rates, lower fees

Advantages of consumer credit include all of the following, EXCEPT Selected Answer: It gives consumers the opportunity to overspend Answers: It gives consumers the opportunity to overspend It enables people to enjoy goods and services now and pay for them based on future income It helps reduce risks associated with carrying and storing large amounts of cash It offers the consumer a 'float' opportunity (i.e., a time lag between when you make the puchase and when the payment is due or starts accruing interest).

It gives consumers the opportunity to overspend

The debt-payments-to-income ratio is an important measure of debt capacity. Experts recommend that it not exceed 20%. John has an after-tax income of $5,000 per month. He has a monthly car payment of $600, an average credit card bill of $400, and a mortgage payment of $1200. What is true about John's debt-payment-to-income ratio? Answers: John's debt payments exceed the recommended 20% debt-payments-to-income ratio John's debt payments are right at the border of the recommended 20% debt-payments-to-income ratio John's debt payments are below the recommended 20% debt-payments-to-income ratio Cannot determine based on information given

John's debt payments are right at the border of the recommended 20% debt-payments-to-income ratio

Direct costs to the debtor under a Chapter 13 bankrupcy would include all the following EXCEPT Selected Answer: Lender fees Answers: Lender fees Court Costs Attorney's fees Trustee's fees and costs

Lender Fees

Money market accounts and Money market funds are similar in nature. The following statements are true about these accounts, EXCEPT: Selected Answer: Money market accounts allow for unlimited check writing while money market funds do not. Answers: Money market accounts are insured by FDIC, money market funds are not Money market accounts are offered by banks, money market funds are offered by investment companies Money market accounts allow for unlimited check writing while money market funds do not. Money market accounts may impose a fee when you go below the required minimum balance

Money market accounts allow for unlimited check writing while money market funds do not.

For open-ended credit like credit cards, a consumer can choose to only pay a minimum payment on the card. The following are TRUE about minimum payments on credit cards EXCEPT Selected Answer: Paying the minimum payment will result in paying off the balance quickly. Answers: Credit card issuers have to include a 'minimum payment warning' in their billing statements Paying the minimum payment will result in paying more in interest than if paying more than the minimum payment Paying the minimum payment will result in keeping a balance on the card for several years (assuming no additional purchases or payments) Paying the minimum payment will result in paying off the balance quickly.

Paying the minimum payment will result in paying off the balance quickly.

The following are true about Consumer Credit, EXCEPT Selected Answer: Savings accounts are consumer credit products Answers: Consumer credit refers to use of credit for personal needs Savings accounts are consumer credit products Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Home mortgages are credit products, but are considered separate from consumer credit.

Savings accounts are consumer credit products

he following is an actual bank disclosure statement: "We will charge you a fee of $37 each time we pay an overdraft. • Also, if your account remains overdrawn for 4 consecutive business days, on the 5th business day we will charge a Sustained Overdraft Fee of $30. An additional $30 fee will be charged on the 8th business day if your account remains overdrawn for 7 consecutive business days, and on the 11th business day if your account remains overdrawn for 10 consecutive business days — up to a total of $90. • We will limit to 7 the combined number of Overdraft Fees and/or Returned Item Fees we will charge on any one business day, up to a total of $259." Jane was running low on money in her checking account, but she decided to get a McDonalds meal anyway, using her debit card, knowing that the bank would let her overdraw her account. The meal cost $8.50. As a result, her checking account went into overdraft. She replenished the account 12 business days later, once her paycheck came into her account. What did this McDonalds meal end up costing Jane (including fees to the bank)?

$135.50 Response Feedback: Total cost would be $8.50 (original charge) + $37 initial overdraft fee + $30 sustained overdraft fee on day 5, +$30 sustained overdraft fee on day 7 + $30 sustained overdraft fee on day 11 = $135.50

Jim wants to calculate his total annual cost of his checking account. He pays a monthly maintenance fee of $3 and then he pays an additional processing fee for each check he writes of $0.20 per check. He writes on average 5 checks per month. What is is annual cost of this checking account? Selected Answer: $48 Answers: $4 $12 $36 $48 Response Feedback: Monthly maintenance fee: $3 for 12 months = $36 Check transaction fee $0.20 per check x 5 checks per month x 12 months = $12 Total cost $48

$48

A credit card disclosure statement includes the following information about transaction fees: "Cash Advance Transaction Fee: Either $5 of 3% of the amount of each cash advance, whichever is greater." Jill uses her credit card to withdraw $200 from a nearby ATM. What transaction fee will she pay to the credit card company for this? Selected Answer: $6 Answers: $3 $5 $6 $9

$6

Jane wants to get more aggressive with her savings, and she has decided that she would like to 'lock her money away' in order to avoid the temptation to tap into her savings when she doesn't need to. She is confident that she could put $5000 of savings away for 5 years before accessing it. In order to get the highest rate available on her savings, what type of savings product is best for Jane? Selected Answer: Certificate of Deposit (CD) Answers: Savings Account Money Market Account Money Market Fund Certificate of Deposit (CD)

CD

Two types of consumer credit exist: closed-end credit and open-end credit. Of the following, which is an example of a closed-end credit product? Selected Answer: Car loan Answers: Overdraft protection Visa credit card Store credit card issued by Target Car loan

Car Loans

Jane has a loan with simple interest. She will borrow $1000 at a 5% rate for 3 years. How much does she end up paying in interest for this loan? Selected Answer: $150 Answers: $50 $150 $165 $180 Response Feedback: $50 per year for 3 years = $150 total

150

What is the Annual Percentage Yield (APY) for a savings account that earned $54 in interest on $1250 over the past 365 days? Selected Answer: 4.3% Answers: 4.3% 4.5% 4.7% 4.9% Response Feedback: APY = $54/$1250 = 4.3%

4.3%

The Consumer Credit Counseling Services (CCCS) is a local, nonprofit organization. Its main activities are: Selected Answer: A and B Answers: A. Helping families with serious debt problems better manage their money B. Help people prevent debt problems by teaching them better budget planning C. Use goverment support programs to help people pay off debt A and B A, B and C.

A and B not C

Experian, Equifax and TransUnion are three national credit bureaus that provide credit reporting on individuals. The following are legimitate reasons for requesting a credit report EXCEPT Selected Answer: A neighbor can request a your credit report to help determine whether to move or not Answers: You can request a credit report on yourself every year in order to monitor your credit and protect against identity fraud or theft Potential lenders can request a credit report to evaluate a loan request Potential insurers can request a credit report to underwrite insurance A neighbor can request a your credit report to help determine whether to move or not

A neighbor can request a your credit report to help determine whether to move or not

Overindebtedness is sometimes referred to as the nation's number one family financial problem. Which of the following are frequent reasons cited for indebtedness? Selected Answer: All of these are frequent reasons for indebtedness Answers: Emotional problems, such as the need for instant gratification Expectation of instant comfort The amount of finance charges All of these are frequent reasons for indebtedness

All of the above

Travel & Entertainment cards (T&E) cards are really not credit cards, because the monthly balance is due in full. However, most people think of these as credit cards because they don't pay the moment they purchase goods or services. The biggest providers of T&E cards are Answers: Visa and Mastercard United and American Airlines American Express and Diners Club Diners Club and MasterCard

American Express and Diners Club

With a 25% marginal tax rate and a choice between A) a tax-free yield of 3% or B) a taxable yield of 4%, which is the better option? Answers: Option A Option B Both options are the same There is not enough information to answer this question

Both are the same`

All of the following Financial institutions are considered 'High Cost Financial Service Providers' EXCEPT Selected Answer: Brokerage firm Answers: Check-cashing outlet Payday loan company Rent-to-own center Response Feedback: Hig-cost financial service providers include pawnshops, check-cashing outlets, payday loan companyies, rent-to-own cetners and car title loan companies. Brokerage firms are considered nondeposit institutions.

Brokerage Firm