Personal Finance exam 3

B

An advantage of using online real estate services is that A. you have easier access to qualified real estate agents. B. the commissions and fees are often less than those charged by traditional full-service real estate agents. C. your chances of selling a house are about 50% greater. D. you will get a higher price for houses sold or pay lower prices for houses bought.

B

When a mortgage lender provides loans to borrowers without sufficient income or a down payment, the lender is said to provide a ________ mortgage. A. VA B. subprime C. prime D. FHA

true

When buying a home, the seller pays the real estate agent's commission, so you pay no fee for the agent's services except in the form of a higher purchase price. True False

A

When homeowners expect that interest rates will rise, they prefer A. fixed rate loans. B. adjustable rate mortgages. C. balloon payment mortgages. D. decreasing term mortgages.

C

Which of the following costs associated with home ownership is hardest to budget? A. Insurance B. Taxes C. Repairs D. Mortgage payments

C

Which of the following is a key benefit of leasing? A. You do not have to fill out a credit application. B. You do not have to maintain the car since you do not own it. C. You are able to drive a more expensive car for the same monthly payment versus buying. D. You do not have to fill out a credit application, You do not have to maintain the car since you do not own it and You are able to drive a more expensive car for the same monthly payment versus buying are all correct.

B

Which of the following is the most common source of financing for personal loans? A. Family and friends B. Financial institutions C. Peer-to-peer lending D. Sales finance companies

A

Which of the following statements is true about bank credit cards like VISA and MasterCard? A. They are an excellent source of emergency funds for unexpected expenses. B. Their interest rate is generally lower than a loan at a credit union. C. Like home equity loans, the interest paid on credit cards is tax deductible. D. Their interest rate is lower than home equity lines of credit.

A

Why is it so important that you make all of your credit and loan payments on time? A. Late payment history lasts 7 years on your credit file. B. The lender will be annoyed and not extend additional credit to you. C. Late payment history lasts 10 years on your credit file. D. Paying your credit cards and loans late can lead to bankruptcy.

true

Your credit report can be requested online and should be checked periodically for errors. True False

C

Fannie Mae and Freddie Mac's dominance of the secondary mortgage market during 1995-2008 encouraged mortgage originators to A. extend only 30-year, fixed-rate mortgages. B. require higher down payments in order to obtain a home mortgage. C. loosen lending standards as long as the mortgages were acceptable to Fannie Mae and Freddie Mac. D. scrutinize the credit-worthiness of borrowers more carefully.

false

Government-backed mortgages may require lower down payments than conventional mortgages, but usually charge higher interest rates. True False

true

Home equity is defined as the market value of the home less the debt owed on the home. True False

false

If you discover an error on your credit card statement, you should not pay any portion of the balance until the matter has been resolved. True False

B

Adjustable-rate mortgages are riskier than fixed-rate mortgages. However, they may be useful when the interest rate is expected to ________ in the future. A. increase B. decrease C. remain stable D. None of these.

B

Advantages of using credit are all of the following except: A. the ability to cover cash flow shortages. B. increases the number of checks written. C. the ability to buy large items earlier. D. convenience in making day-to-day transactions.

true

Advantages of using credit include the ability to make purchases without cash and the convenience of not carrying checks. True False

A

After a period of price stability in the 1990s, housing prices increased dramatically during 2002-2005 because A. regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward. B. regulations designed to make housing more affordable decreased the number of sub-prime loans and made home buying a safer investment. C. mortgage lending standards tightened, and therefore mortgage loans for housing were only available to buyers purchasing highly expensive homes. D. home buyers were putting more money down and requiring more return on their investment, driving housing prices up.

B

Disadvantages of leasing a vehicle include all of the following except A. no equity in the car. B. cost of finding a buyer for the car at the termination of the lease. C. responsibility for maintenance costs. D. additional charges beyond the monthly lease payments.

D

If you receive a phone call that seeks to verify or update personal information you should A. ask several questions of the solicitor to verify the person's authenticity. B. ask to speak to a supervisor. C. obtain the person's name and address in case you need to contact him or her in the future. D. obtain the person's name and phone number and call the company to verify his or her credentials.

true

In determining the amount of down payment and monthly mortgage payments you can afford, you should maintain some extra funds for liquidity purposes to cover unanticipated bills. True False

true

Longer maturities for loans result in lower monthly payments and therefore make it easier to cover payments each month. True False

B

New regulations that provide clearer and more favorable financing rules for individual credit card users do all of the following except A. prohibit interest rate increases if you miss a payment on another credit card. B. cap the amount of any increase to 5%. C. require a 45 day notice of any credit card interest rate increase. D. prohibit the rate on existing credit card balances from being increased unless you are at least 60 days late on payments.

B

Of the following statements, which is not an advantage of using credit? A. Using credit wisely creates stability and allows you to establish a favorable credit history. B. Buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems. C. Using credit is safe since using charge accounts and credit cards when you shop and travel is safer than carrying large amounts of cash. D. Credit cards permit the purchase of goods even when cash funds are low.

C

Over the life of a mortgage, the payment to principal ________ and the portion to interest expense ________. A. increases; increases B. decreases; increases C. increases; decreases D. decreases; decreases

true

The annual percentage rate (APR) is useful because it allows you to easily compare financing costs among various possible creditors. True False

false

The cost of financing with a payday loan is more reasonable than the cost of obtaining credit through a credit card. True False

B

The document that specifies the term of the loan as agreed to by the borrower and lender is called the A. loan repayment schedule. B. loan contract. C. loan application. D. terms of agreement.

C

The increase of sub-prime (including Alt-A) loans as a share of the total from 2001-2005 was an important contributing factor to the economic crisis of 2008 because A. these loans initially reduced the demand for housing. B. these loans initially reduced housing prices. C. the default and foreclosure rates on these loans are several times higher than conventional loans to prime borrowers. D. the default and foreclosure rates on these loans are considerably lower than conventional loans to prime borrowers.

true

There are limits on how much a student can borrow through federal student loans, so many students also have to obtain private loans from financial institutions. True False