FIN 223 - EXAM 2 - WSU

Credit unions are more likely to be paying (higher/lower) interest on their accounts than a commercial bank

Higher

The decision whether or not to grant you credit will be made by (individual creditors/credit bureau)

Individual Creditors

Having some type of overdraft protection with your bank will end up costing (more/less) than having a check bounce

Less

It would make sense to purchase a vehicle at the end of a close ended lease if the residual value in the lease agreement is (more/less) than the car's market value

Less

(Lessor/Lessee) is another term for landlord

Lessor

A person who pays off their credit balance every month should look for a credit card with a (low interest rate/no annual fee)

No annual fee

Most creditors (will/will not) be willing to work something out with you if you're having difficulty meeting your payments

Will

An improper use of extended credit will be to buy a (car/non durable goods

durable goods

Credit unions are...

member owned financial cooperatives

Home owners may be able to deduct (mortgage principle/mortgage interests)

mortgage interests

The most popular use of consumer loans is to...

purchase a car

To establish credit worthiness, you probably should first do what...

start a checking and a savings account

As a percentage of your take home pay, monthly consumer credit payments should not exceed...

20%

What are the five C's of credit and their definitions?

A) Character i. A key factor in defining the Borrower's willingness to live up to the terms of the loan B) Capacity i. The ability of the Borrower to service the loan in a timely fashion. C) Collateral i. Something of value that's used to secure a loan and that the lender can claim in case of default D) Capital i. The amount of unencumbered assets owned by the borrower used as another indicator of the borrower's ability to repay the loan. E) Condition i. The extent to which prevailing economic conditions could affect the borrower's ability to service the loan

Low interest rates that have persisted since the financial crisis have been a net benefit to (borrowers/retirees)

Borrowers

An investor would typically expect to receive interests rates on a (certificate of deposit/treasury bill)

Certificates of deposit

A (checking/savings) account is called a demand deposit account

Checking

With a (Close-ended/open-ended) you turn in the car at the end of the term and have no financial obligation as a result of the residual value

Close-ended

The best loan rates for consumer loans are usually from (savings and loan associations/consumer finance companies)

Consumer finance companies

An example of an open account credit would be a bank (debit card/credit card)

Credit card

(Depreciation/amortization) is a loss in the value of an asset such as an automobile that occurs over its period of ownership

Depreciation

Consolidation loans are generally (inexpensive/expensive)

Expensive

(T/F) The key to credit worthiness is to keep your debt safety ratio as high as possible

F

(T/F) Using credit is the ideal way to provide for financial emergencies

F

(T/F) You can stop payment when you purchase an item with your debit card

F

Commercial banks are insured by the (FDIC) what does FDIC stand for...

Federal Deposit Insurance Corporation

Borrowing from relatives is (highly/seldom) recommended by financial

Seldom

(T/F) A close ended automobile lease is the most popular type of lease

T

(T/F) A loan to value ratio of 80% would require a buyer to make a 20% down payment

T

(T/F) As a home owner the federal gov. may allow you to deduct interest expenses and taxes paid on properties

T

(T/F) Automobiles tend to decrease in value over time

T

(T/F) Bank credit card cash advances will begin accruing interest charges

T

(T/F) Collateral is an item of value used to secure the principle portion of a loan

T

(T/F) Consumer loans are most commonly used to obtain durable goods

T

(T/F) Credit union members are expected to have some common bond

T

(T/F) Credit unions grant loans only to members of the credit union

T

(T/F) Having arranged and fully repaid a small loan should help improve your credit worthiness

T

(T/F) One could expect to earn a higher rate of interest on a certificate of deposit than a checking account

T

(T/F) The FDIC insures depositors' funds, up to $250,000 at member banks under the same depositor's name

T

(T/F) The largest single investment you will undertake in your lifetime will probably be the purchase of a house

T

(T/F) The purpose of a credit report is to evaluate the kind of risk you oppose to the lender

T

(T/F) When buying a used car, it is important to get it checked by a reputable mechanic

T

Sometimes it may be better to use savings rather than borrowing to make a purchase. This would be recommended when?

The cost of borrowing is greater than the interest earned on the savings.

An important rule for est. a savings plan is to...

all of the above

When researching used car prices, you can check one of the popular price guides like the...

all of the above

The first step in the auto buying process should be...

analyze how much you can afford to spend on a car