personal finance exam 5,6

Assuming you meet the income and other​ qualifications, what is the maximum amount of educational tax credits you can claim for 4 years of school at your state​ university?

$10,000​, which is claiming the American Opportunity Credit of $2,500 each of the four years.

In 2017 the average APR on standard variable−rate credit cards was

16%

When you are considering different investment options and want to maximize your​ returns, be sure to compare the​ investments'

APY's

The Truth In Lending Act requires that all consumer credit agreements disclose the​ ________ in bold​ print?

Annual Percentage Rate​ (APR)

Your​ bank, First​ Bank, charges you​ $1.50 every time you use an ATM that is not owned by them.​ Unfortunately, there is no First Bank ATM near your school. There is a Second Bank ATM in the Student​ Center, which you use several times a week to withdraw​ $10 at a time for​ lunch, video​ games, etc. What is the best piece of advice regarding these​ transactions?

Avoid them since you are effectively paying​ 15% interest to access your cash

The choice of a credit card is a matter of personal credit card philosophy. If you are a credit​ user, the most important decision factor is the​ card's A. length of grace period. B. APR on the unpaid balance. C. minimum payment. D. late payment fee. E. annual fee.

B: APR on the unpaid balance.

which of the following is not a liquid asset? a. CDs B. Credit cards C. Checking accounts D. Money market funds

B: Credit cards

Which of the following is a disadvantage of credit​ cards? A. Allows for consumption before the purchase is fully paid for B. The finance charge that accrues on the account if not paid off in full each month C. Emergency use D. Allows for online shopping

B:The finance charge that accrues on the account if not paid off in full each month

How do you compare cash management alternatives to determine which is best for​ you?

Consider their safety or risk, Compare returns using comparable interest rates, Take into account their tax status.

Which of the following financial institutions is a not−for−profit organization that is open only to members of that institution and tends to offer more favorable interest rates to borrowers and​ savers? A. Savings bank B. Commercial bank C. Savings and loan association D. Credit union E. None of the above are correct.

D: credit union

By law you have certain rights in connection with the credit bureau. They are A. the right to file a statement presenting your view of a disputed issue. B. the right to view your personal credit report. C. the right to point out errors found in your file. D. the right to request the credit bureau to correct mistakes in your file. E. all of the above.

E: all of the above

Which of the five Cs of credit would your actual home be in relation to your​ mortgage? A. Capital B. Conditions C. Character D. Capacity E. Collateral

E: collateral

What is the​ FDIC?

Federal Deposit Insurance Corporation

Michael has a credit limit and a balance of​ $3,000 on his Visa card. His car broke​ down, he charged the​ $500 repairs to his Visa which he knows put him over his credit limit for the month. His payment is due on the 20th so he made sure that he had his​ $750 payment to the post office on the 20th. Most​ likely, what penalties or​ fees, if​ any, will he​ incur? A. Only the over−the−limit fee. B. Only the penalty​ APR, depending on his credit card company. C. Only the late​ fee, since his payment will lower his balance below his credit limit. D. He will likely incur the penalty​ APR, as well as an over−the−limit fee and a late fee—because VISA has to receive his payment in its office by the​ 20th, not have it postmarked by the 20th E. None of the above choices accurately describes the situation.

He will likely incur the penalty​ APR, as well as an over−the−limit fee and a late fee—because VISA has to receive his payment in its office by the​ 20th, not have it postmarked by the 20th.

When you use a credit card at a​ store, the store is generally charged a fee ranging from​ 1.5% to​ 5%. What is this fee​ called?

Merchant discount fee

Jessica always thought the grace−period feature of her credit card was a wonderful idea because her charges were interest−free during the grace period. After taking Dr. Art​ Keown's personal finance​ course, she learned this startling truth about grace periods.

Most banks eliminate their grace period on new purchases if you​ don't pay your balance in full.

You have​ $5,000 in a 36 month Certificate of Deposit that has an APR of​ 3.75%. If inflation averages​ 4.25% during these 36​ months, what is the real return on your​ CD?

Negative .50 percent

Which of the following characteristics apply to liquid​ assets?

The temptation to spend is greater, They involve low risk, They are characterized by low returns.

Sometimes retailers will give you up to a​ 5% discount if you pay cash for their products instead of using your credit card.​ Why?

They are saving on the merchants discount fee so they pass the savings on to you.

What type of a credit card is issued in partnership with a specific charity or​ organization, such as Mothers Against Drunk Driving​ (MADD), the National Rifle Association​ (NRA), or a college or​ university?

affinity card

Credit cards issued in conjunction with particular charities or​ organizations, like the Sierra Club or the Humane​ Society, that send a portion of their annual fee or percentage of their purchases back to the sponsoring organization are known as

affinity cards

The main factor that determines the cost of a line of credit is the​ ________, which is also considered the true simple interest rate paid over the life of the loan.

annual percentage rate (apr)

Comprehensive financial services packages that offer checking​ accounts, debit and credit​ cards, loans and brokerage services are known​ as?

asset management accounts

According to the Bankcard Holders Association of​ America, about 95 percent of all bank card issuers use the

average daily balance method

Which of the following financial institutions were originally established to provide mortgage loans to​ depositors? A. Internet banks B. Commercial banks C. Savings and loan associations D. Credit unions

c: savings and loan associates

A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called a

certificate of deposit

Financial institutions that provide traditional checking and savings accounts are commonly referred to as

deposit−type financial institutions.

Everyone who accessed your credit report within the last seven years appears in an​ "inquiry" list that appears on your credit report.(T or F)

false

Most credit cards offer a 31−to 35−day grace period from the date of the bill to make payments.(T or F)

false

The average daily balance method calculates interest payments based on the ending balance of the previous period. (T or F)

false

There is no cash advance fee when you use your credit card at an ATM machine. (t or f)

false

Unsecured loans are generally less risky to lenders than secured loans. Therefore secured loans typically charge a higher APR than unsecured loans.(t or F)

false

credit card issuers are free to set up shop near large university campuses and offer free gifts−anything from free or discounted flights to free Frisbees.(T or F)

false

The Truth in Savings Act of 1993

helps investors compare interest rates on investment options.

Cash and investments that can be easily converted into cash are termed

liquid assets

What is the name of an investment company that raises funds from​ investors, pools the​ money, and invests in stocks or​ bonds?

mutual fund firm

One of the unpleasant secrets about using your credit card for a cash advance is that

payments do not apply to cash advance balances unless the balance for regular credit purchases is zero.

The​ ________ is the interest rate you pay on your balance if you​ don't make your minimum payments on time.

penalty rate

Liquid assets or funds are important to

prevent overdrafts in checking accounts. cover unplanned expenses prevent interrupting your long−term investments,cover some planned expenses.

Pay yourself first refers to

putting money into a savings account

Credit cards are a form of​ ________ credit.

revolving

Because liquid assets can be turned into cash quickly and with little​ loss, they have little risk associated with them and therefore provide a low rate of return for the consumer. (T or F)

true

Bridge loans provide short−term funding until longer−term or additional financing is found. (T or F)

true

Credit card companies send out a whopping 6 billion credit card offers annually−roughly60 offers per U.S.​ household! (T or F)

true

Defaulting on a secured loan may lead to the collateral being repossessed. (t or f)

true

Due to compounding​ frequency, the actual interest rate or APY you pay is higher than the advertised interest rate or APR. (T or F)

true

Financially savvy people take advantage of the grace period on major purchases and pay the balance off in​ full; thus avoiding finance charges. (T or F)

true

For the average consumer there is usually a set limit on open or revolving credit accounts. (T or F)

true

Late library fines and unpaid parking tickets can hurt your credit score. (t or f)

true

Liquid assets allow you to cover unplanned expenses without having to interrupt your long−term investments or liquidate any tangible assets.(T or F)

true

Nondeposit−type financial institutions are commonly referred to as mutual funds and brokerage firms. (T or F)

true

One of the more important factors in determining your credit score is the length of your credit history.(T or F)

true

Over​ 70% of the 25 biggest credit card issuers do not charge annual fees. (t or F)

true

Taking a cash advance on your credit card for daily living expenses may not be a wise financial decision because interest begins on the cash advance balance amount immediately. (T or F)

true

​Typically, the credit card issuer allows you a grace​ period, which means

you are not charged any interest during this grace period. you must pay your balance off in full to benefit from the grace period.

When you withdraw cash from an ATM using your credit card

you begin paying interest immediately

Your credit card company cannot increase your rate for the first 12 months after you open an account unless

your​ card's introductory rate expires and your rate reverts to the ​"go−​to" rate the company disclosed when you got the card.

The use of credit involves receiving​ cash, goods, or services with an obligation to pay later. Which statement is not an opening line to the use of credit in a​ shopper's language?

"put it on my debit"

credit card insurance is usually unnecessary since your liability on credit card losses is limited by law to

$50

Most credit cards have a​ ________ grace period from the date of the bill to make payments.

21 to 25 day

The Credit Card​ Accountability, Responsibility, and Disclosure​ (CARD) Act established fee caps for cards. Card fees cannot total more than​ ________ of the initial credit limit.

25%

the lowest FICO a consumer can achieve is

300

A 2016 TD Ameritrade survey found what percent of respondents said that credit card debt would make them less likely to date​ someone?

44%

How long do you have to begin an investigation into a billing problem under the Fair Credit Billing​ Act?

60 days

​________% of Americans age 25−34 carry a balance on their credit cards.

71%

Which method sums the outstanding balances owed each day during the billing period and divides by the number of days in the​ period? A. Average daily balance B. Balance calculation method C. Simple interest D. Previous balance E.

A: average daily balance

Which of the following is not an advantage of a CD as a cash management​ alternative? A. CDs offer liquidity. B. CDs are convenient to purchase. C. CDs offer a wide selection of maturities. D. CDs are insured. E. CDs have fixed interest​ rates, which are beneficial if interest rates drop.

A: cd's offer liquidity

The​ ________ converts interest rates compounded for different periods into comparable annual​ rates, allowing you to compare interest rates easily.

APY

Which of the following statements is most correct regarding a secured credit​ card A. It is a valuable form of credit insurance — you are protected against loss if the card is lost or stolen. B. It provides a higher level of user​ security, using technology to prevent illegal use. C. It is useful to someone who has bad credit or no credit established yet. D. Compared to non−secured credit​ cards, it always carries a much lower rate of interest.

C: It is useful to someone who has bad credit or no credit established yet.

Your credit score affects A. your mortgage rate. B. the rate you pay on your credit cards. C. the amount of junk mail offering additional credit cards that you receive. D. the size of your credit line. E. All of the above are correct answers.

E: All of the above are correct answers.

Which of the following apply to getting a cash advance with a credit​ card? A. You begin paying interest immediately. B. Cash advances are available at ATM machines. C. There may be a cash advance fee. D. The interest rate may be higher than on regular purchases. E. All of the above

E: all of the above

Research has determined that undergraduate college students tend to behave in similar manners with regards to their credit card usage. As noted in Chapter​ 6, which of the following behaviors are indicative of undergraduate​ students' credit card​ behaviors? A. They pay off all of their cards in full each month. B. They make more than the required minimum payment on​ 90% of all other cards each month. C. Their parents do not frequently pay their credit card balances for them. D. They make more than their minimum payment each month but still tend to carry a balance on their cards.

They make more than their minimum payment each month but still tend to carry a balance on their cards.

The interest rate earned on a money market deposit account is generally higher than the interest earned on a Bank savings account. (T or F)

True

What is the name for comprehensive financial services packages offered by brokerage​ firms?

asset management accounts

Changes to your credit card policies and rates are usually announced via​ "________"; which are notices enclosed with your bill.

bill stuffers

Credit purchases made for personal needs like home mortgages or car loans are referred to as revolving credit. (T or F)

false

It is against the law for your potential employer to use your credit score for employment considerations. (T or F)

false

It is best for college students to wait and begin saving once they are​ "making more​ money." (T or F)

false

It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future.(T or F)

false

One of the unpleasant secrets of using your credit card for a cash advance is that the APR on the cash advance is typically lower than the APR for normal purchases. (t or f)

false

Only Prestige or Premium credit cards offer a grace period.(T or F)

false

A credit bureau is a private organization that maintains credit information on​ individuals, which it allows subscribers to access for a fee.(T or f)

true

A debit card is something of a cross between a credit card and a checking account. (T or F)

true

A secured credit card is a good tool to help establish credit.(T or F)

true

A single−purpose card is a credit card that can be used only at a specific company(T or F)

true

The National Credit Union Association is a federal agency that insures deposits at credit unions.(T or F)

true

The deregulation of the 1980s has allowed brokerage firms to offer traditional banking​ services, and has also let banks offer services formerly found only at investment companies.(T or F)

true

When you automate your savings you are less likely to spend those dollars because they never become part of the funds in your checking account. (T or F)

true

Your credit card company is required to send you a notice 45 days before they can increase your interest​ rate, change certain fees​ (such as annual​ fees, cash−advance ​fees, and late​ fees), or make other significant changes to the terms of your card.(T OR F)

true