Finance 308 Exam 1
Experts suggest that the debt payments-to-income ratio should be a maximum of:
20%
Acme Home Lending offers home equity loans up to 80 percent of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?
200,000*80%-50,000=110,000 $110,000
Rachel Johnson went to the ATM to withdraw $300 cash with her debit card. She inadvertently pulled out her credit card instead, not realizing the expenses for cash advances. If her credit card company charges a cash advance fee of 3 percent and interest at 24 percent APR, what are the total fees she will pay for her mistake?
300*3%=9 300*24%*1/12=6 9+6=15 $15
Some people keep various documents and valuables in safe deposit boxes in banks and other financial institutions because the safety of the contents of these boxes is absolutely foolproof.
False
The longer it takes for you to pay off a bill, the less interest you pay.
False
The most expensive loans are often provided by parents or other family members.
False
Using the simple interest formula, the interest on a $1,000 loan at 5 percent interest for one year is $55.
False
You have a legal right to sue a credit bureau if you observe an error in your file.
False
Home equity loans should be used for:
Major expenses, such as home improvements or education.
When calculating the debt-to-equity ratio, which of the following is NOT included?
Mortgage Balance
Interest paid on a credit card is tax-deductible.
False
Money management refers to annual financial activities necessary to manage personal economic resources.
False
Which of the following is NOT a main purpose of a budget?
It allows you to spend your money without financial worry.
After having established a spending plan, it is important to:
Keep track of your actual income and expenses.
If Vince charged $280 on his credit card with 22 percent APR and he paid his balance in full within the grace period, how much was he required to pay?
$280.00
Rebecca Wilson budgeted $395 for a new wardrobe in June. She actually spent $425. What is her budget variance?
$30 deficit
Most information in your credit file (except bankruptcies) may be reported for only seven years.
True
Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.
True
The easiest loans to obtain are also the most expensive. The most expensive loans are provided by finance companies and pawn shops.
True
When creating a budget, it is important to:
"Pay yourself first" by setting aside savings before other expenses are budgeted.
If Vince charged $200 on his credit card with 18 percent APR and he paid his balance in full within the grace period, how much was he required to pay?
$200.00
Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
A debit card
Which of the following is NOT associated with credit cards?
A debit to your checking account
Joshua borrowed $500 on January 1, 2021, and paid $25 in interest. The bank charged him a service charge of $2. He paid it all back at once on December 31, 2021. What was the APR? (Enter your answer as a percent rounded to 1 decimal place.)
APR= Finance Charge/Amount Borrowed =(25+2)/500 =5.4%
A budget deficit results when a person's or family's:
Actual spending exceeds planned spending.
Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by:
Adding up basic monthly expenses and subtracting this total from take-home pay, plus figuring out what to give up to make the monthly loan payment.
Which of the following is NOT a valid credit application question? How much of a loan are you requesting? What is the account number for your checking account? What is the name of the nearest relative not living with you? How many dependents do you have?
All of these are valid credit application questions
The APR is the percentage cost of credit on a(n) ______________ basis.
Annual
Items that you own that have a monetary value are referred to as:
Assets
The information gathered from your loan application and the credit bureau are factors of your credit rating.
True
To protect your credit card, you should keep a record of your credit card number separate from your card.
True
The difference between the amount budgeted and the actual amount received or spent is called the:
Budget variance.
You can lend money to micro-entrepreneurs through Kiva.org, a microlending website.
True
Financial documents that you may need quick access to should be kept in a safe deposit box.
False
Money management refers to:
Day-to-day financial activities.
In the five Cs of credit, capital refers to the borrower's ability to pay additional debts. Group starts
False
A budget is a record of how a person or family has spent money.
False
An organized system of financial records provides a basis for reducing credit card usage.
False
Financial advisers suggest that an emergency fund should cover one to two months of living expenses.
False
A home file should be used to keep:
Financial records for current needs.
Credit reports can be obtained for all of the following reasons except:
Inquiry by a neighbor.
The periodic charge for the use of credit is called:
Interest
Common stock and bond brokerage statements are an example of a(n) ____________ record.
Investment
When creating a budget, which of the following statements is true?
Numbers in the budget are estimates.
How long should you keep your most current will?
Permanently
The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a:
Personal balance sheet.
A cash advance:
Requires you to pay interest every day until you repay the cash advance
How long should you keep documents relating to investments?
Seven years
A loan that must be repaid in total on a specified day, usually within 30 to 90 days, is:
Single lump-sum credit.
All of the following are consumer credit protection laws except:
The Credit Lawsuit Act.
A line of credit is:
The maximum dollar amount of credit the lender has made available to a borrower.
Bankruptcy courts treat gift cards:
The same way they handle unsecured debt.
Fredrick received a $1,400 loan from the bank for a new appliance. The bank is using the simple interest formula for this two-year, 8 percent loan. What is his total interest?
Total simple interest= Loan amount*Loan period*Interest rate =1400*2*8% $224
A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company.
True
In an organized system of financial records, birth and marriage certificates belong in a safe deposit box.
True
In an organized system of financial records, investment records belong in a home file, home computer, or online.
True
In an organized system of financial records, medical information belongs in a home file.
True
In the five Cs of credit, character refers to the borrower's trustworthiness and stability.
True
Money management refers to day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.
True
Which of the following is often the first sign of a stolen identity?
You receive bills for a credit card account you never opened.
If you think a bill is wrong or you want more information about the bill, then you and your creditor should follow all of the steps here except:
Your creditor must reimburse you for your time spent researching the error.
A loan officer is examining whether or not to offer you a loan today. Specifically, she is examining your income and debts. Which of the five Cs of credit is the loan officer reviewing?
capital
Which of the following is the only online source authorized to provide you with a free copy of your credit report annually?
www.annualcreditreport.com
