Test 2 Personal Finance

The Annual Percentage Yield is the same as the

effective rate

Sales finance companies

buy installment loans from retailers

When reporting errors or unauthorized transactions, it is best to notify your bank

by telephone and follow up with a letter and keep a copy for your files

Before taking out student loans, all the following should be considered except

federal student aid, personal resources, grants, and scholarships

The interest rates and monthly mortgage payments will not change over the life of your mortgage; you have a

fixed-rate mortgage

A single-payment loan is advantageous only if

funds will be available to repay the lump sum

A _____ clause gives the lender legal recourse in collecting the debt if the borrower does not pay.

garnishment

Interest will almost always begin to accrue immediately when you use a bank credit card to

get cash advances

If interest on a savings account is compounded semiannually, the effective rate of interest will be

higher than the nominal rate

Interest rates on _______ are typically lower than on any other form of consumer credit

home equity loans

A check you issued last week has been stolen. You can prevent it from being withdrawn from your account by an unauthorized person by

requesting a stop payment

Persons with very poor credit ratings can still get _______ credit cards

secured

Consumers whose debt burden has become very heavy might apply for a

consolidation loan

The highest interest rate installment loans are usually made by

consumer finance companies

Share draft accounts are commonly offered by

credit unions

One can arrange auto loans through

credit unions, consumer finance companies, auto dealers, and banks

To qualify for a Perkins loan, you must

demonstrate financial need

When an S&L is a mutual association, it means that it is owned by the

depositors

The loss of value in a car over time is called

depreciation

Sheldon has a home valued at $108,000 and an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of market value, how much could Sheldon borrow using a home equity loan?

$16,400

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college. Assuming he pays interest as in accrues, if Bob dies before the debt is repaid his beneficiary will receive

$225,000

Alice lost her ATM card at the lake and reported it missing the next day. She found that $800 had been withdrawn from her savings account. The most Alice will be legally liable for is

$50

The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12%

12%

Which of the following are important safeguards when using online banking?

128 bit encryption, FDIC insurance, guarantees to protect you against losses, and firewall to protect data

Leasing accounts for about _____ percent of all vehicles sold today.

19

As a percent of take-home pay, monthly consumer credit payment should not exceed

20%

All of the following are useful ways to build a strong credit rating except

Apply for a long-term loan and occasionally be late with a payment

_____ are NOT a type of open credit.

Bank debit cards

At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have ________ lease.

Closed-end

Factors typically influencing the choice of where to maintain a checking account are:

Convenience, services, and cost

A _____ is an agency that provides credit information about individual borrowers to lenders.

Credit Bureau

Personal insolvency can be legally satisfied by

relinquishing all credit cards and chapter 7 bankruptcy

Commercial banks are insured by the

Federal Deposit Insurance Corporation

Joe and Jane have a tendency to build up large balances on their credit cards. Which of the following would be least important for them?

Long grace period

A _____ is an interest-bearing checking account.

NOW account

Which of the following are recommended if you loan money to a friend or relative?

Put the agreement in writing

Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months. based on this information, which of the following housing recommendations would be most appropriate for them?

Rent a home

Vicki Vasquez owns a six month treasury bill that is four months from maturity. She recently encountered medical problems and needs the money now

She can sell the T-bill in the open market

_____ loans do not have to be repaid until after you graduate from college

Stafford and Perkins

Regarding student loans, which of the following is true?

There is a limit on how much can be borrowed

You are going on an overseas trip and you want to have checks that are easily converted into local currency. You should purchase

Traveler's checks

When you lease your apartment from the corporation that owns the building and your lease is an ownership share, your apartment is

a cooperative

If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 90%, then the borrower must make

a minimum down payment of $10,000 plus closing costs

The first choice in housing in the United States is

a single-family home

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the

add-on method

Money Market Mutual Funds

allow check writing

Christina works at a company that offers direct deposit of her paycheck. This service is called

an EFT service

The first step in the auto-buying process should be

analyze how much car you can afford

Money Market Deposit Accounts

are typically federally insured

When canceling a credit card, you should cut up the card and _____ that you are canceling your account.

inform issuer in writing

The majority of each monthly payment at the beginning of the loan goes to pay

interest

Appropriate reasons to use credit include

investments, emergencies, durable expenses, and convenience

advantages of buying a used car rather than a new car include

less expensive

A legal claim that allows creditors to liquidate loan collateral is a

lien

It is NOT a good idea to use credit to

live beyond one's means

Most of the reduction in household indebtedness is due to

loan defaults

reasons why auto leasing is so popular include all of the following except:

lower total cost

The quality of your credit rating is maintained by

meeting credit obligations as contracts require

In which of the following situations would you have to pay additional money when returning a vehicle using a closed-end lease?

mileage limits were exceeded

Homeowners may be allowed to deduct the following on their taxes

mortgage interest

A fee charged by lenders as a condition of a mortgage loan that effectively raises the interest rate is called

mortgage points

Credit Unions are

mutual associations

If you borrow money on a single payment loan and discover you cannot pay it back when it is due you should

negotiate a rollover

A financial advantage of renting compared to purchasing housing is

no need for a down payment

The least expensive method for banks to interact with their customers is

online

To establish creditworthiness you probably should first

open savings and checking accounts

A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be

outstanding

The most popular use of consumer loans is to

purchase a car

The seller of the house typically pays the

real estate agent's commission

All of the following are key items lenders look at in granting credit except

religious affiliations

Earnest money is the sum of money the home buyer deposits with the

seller to indicate intent of purchase

Long-term financial goals often depend on borrowing funds. The type of loan that does not fulfill the long-term goal achievement is _____ loans.

single payment

Which of the following is not a strategy to building your nest egg:

splurge once in a while

Chapter 7 bankruptcy will

stay on ones credit record up to 10 years

With an open account credit, one can often avoid interest charges if

the account balance is paid in full every month

Home equity loans are similar to other installment loans except

the interest paid is generally tax deductible

Commercial banks generally charge lower interest rates than other lending institutions because

they usually take only the best credit risks

A monthly credit card statement need not include information about the

type of the goods purchased

Purchasing credit life or disability insurance protection is usually

very costly

Generally, renting would be preferred to buying when

you have no money to make a down payment, you have just gone through a divorce, and you know your job will be temporary