PERSONAL FINANCE EXAM

According to the Keown​ book, the national average FICO score is around

700

subprime, or nonprime, mortgages are taken out by borrowers with low credit scores, ___ of these mortgages carry adjustable rates

80 percent

fire, theft, and windstorms damage are examples of

perils

John purchases a life insurance policy on his wife Betty where he pays the premium and he will receive the life insurance money when she dies. John is both the ________ and the ________ who will receive the ________ upon the death of Betty, the ________.

policy owner, beneficiary, face amount, insured

PITI stands for the total of your monthly

principal, interest,​ taxes, and insurance.

Credit cards are a form of ___ credit

revolving

Name the items that are deposited in an escrow account.

property taxes, property insurance

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)

According to the U.S. News and World Report, the required investment for a medium income family to raise and support a child for 22 years is approx

$1,450,000

One of the following lists constitutes the five Cs of credit. Select the correct one.

Character, capacity, capital, collateral, conditions

your boyfriend is living in an apartment complex that has had a recent rash of robberies. he has $5000 worth of rare coins. what should he do to protect himself in case of a robbery

a, b, and c

Which of the following is the best strategy for controlling and managing your credit cards and open debt

all

in evaluating your financial history, lenders generally focus on which of the following

all

payday lenders

all

what will the courts do if you file chapter 7 personal bankruptcy

all

which of the following factors plays a role in determining the monthly lease payment of a car

all

which of the following is/are a typical cash need of ones estate

all

which of the following statements is true regarding social security retirement benefits

all

By law your have certain rights in connection with the credit bureau. They are

all of the above

The consumer financial protection bureau was created with the oversight authority necessary to ensure that

all of the above

suppose that you purchased a machine several years ago for your company. You recently sold the machine for more than you paid. this is an example of a

capital gain

you are in the process of purchasing a new home. expenses that the buyer and seller incur when finalizing the transfer of the ownership of the house are called

closing costs

According to the Keown book, a ___ is as loan involving a formal contract that details exactly how much youre borrowing and when and how youre going to pay the loan back

consumer loan

with a ___ you, and usually your employer, pay funds into your retirement plan

contributory retirement plan

a deposit included with an offer to buy that assures the seller that the buyer is serious about buying the house is called

earnest money

you are engaging in ___ when you plan for what happens to your accumulated wealth

estate planning

___ is when a borrower is allowed to temporarily stop making student loan payments for a qualified reaason such as an illness, financial hardship, or serving in a medical or dental internship or residency

forbearance

the difference between an investment and speculation is that an investment___ while speculation depends solely on ___ to produce results

generates a return, supply and demand

___ occurs when someone, without your knowledge or consent, uses your name, address, Social, bank or credit card account number, or other identifying info to commit fraud of other crimes

identity theft

An ___ loan calls for the repayment of both the interest and the principal at regular intervals and is commonly referred to as loan amortization

installment

the purpose of a personal umbrella policy, as an addition to your homeowners policy, is primarily to protect you from

lawsuits and judgements

the ___ date is the date at which the bond issuer must repay the loan or borrowed funds

maturity

In an emergency, you used your credit card for a $500 cash advance. You just received your statement and your total balance due is $1,859, and the cash advance was the most recent charge. You want to be sure to pay for the cash advance so you send in a payment of $700. Your credit card has an APR of 12 percent. How much of your payment will apply to the cash advance balance

none of these

The loan contract is a formal document called a ___ and may contain a ___ specifying who retains control over the item being purchased in the case of default

note, security agreement

common stockholders are entitled to elect the companys board of directors. usually one share of stock is equal to ___ vote

one

What kind of valuable information can you find online at websites such as Edmunds.com or Autosite.com concerning smart buying for automobiles? a) The trade-in value on your current automobile b) The dealer cost and dealer holdback for the automobile you are interested in c) The final price you will pay for the automobile at the dealership d) Only A and B are correct e) All of the above

only a and b

a rule to determine what proportion of each loan payment is principal and interest is

the rule of 78

A recourse clause defines whatever actions a lender can take to recover money from you in case you default on the loan

true

Bonds reduce risk through diversification

true

Holding several types of stock can greatly reduce the risk in your portfolio.

true

Investing in bonds is generally less risky than investing in stocks.

true

an insurance policy is a contract with an insurance company that spells out what losses are covered, what the policy costs, and who receives the payment if a loss occurs

true

college graduates should be prepared to make many financial decisions during their first decade after graduation

true

life insurance and health insurance are designed to transfer the catastrophic risk you cant afford to keep onto the insurance companies

true

personal liability insurance protects you from financial losses incurred if someone is injured on your property or as a result of your actions

true

the size of your social security benefits are determined by your number of years of earning, your average level of earnings, and an adjustment for inflation

true

the trade off for mutual fund diversification is lower than market performance

true

you, not your lender, should determine the amount you want to borrow for a mortgage

true

a chapter 13 personal bankruptcy is characterized by all of the following except

your creditors vote on restructuring your debt repayments