PFIN 7 Chapter 5 Making Automobile and Housing Decisions

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The market price of a house is $125,000, and the home buyer borrows $100,000. Two points are equal to $2,000. a. True b. False

a. True

Which of the following is the biggest fixed auto ownership cost? a. The cost of installment loan payments b. The cost of oil c. The cost of tires d. The cost of maintenance and repair e. The cost of fuel

a. The cost of installment loan payments

Lowballing is a sales technique where the salesperson quotes a low price for a car to get you to make an offer, and negotiates the price upward prior to signing the sales agreement. a. True b. False

a. True

Jacob has taken an SUV on lease from Free Cruisers Inc. for a period of 4 years. Jacob does not need to pay any extra amount when he turns in the vehicle because he didn't exceed the mileage specified in the lease and the SUV is not damaged. He has a: a. right to early termination lease. b. closed-end lease. c. residual lease. d. reassignment option lease. e. purchase option lease.

b. closed-end lease.

You recently bought a new home. You receive title to an individual unit and joint ownership of any common areas and facilities. You have purchased a: a. row house. b. condominium. c. mobile home. d. cooperative. e. single-family home.

b. condominium.

If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ because of the size of the down payment. a. closing points b. private mortgage insurance c. application fees d. homeowner's insurance e. a bond

b. private mortgage insurance

The price of the car you are leasing is called the: a. capital cost reduction. b. residual value. c. capitalized cost. d. money factor. e. purchase option.

c. capitalized cost.

Which of the following is a type of down payment that lowers the potential depreciation and therefore your monthly lease payments on a leased car? a. Money factor b. Initial residual value c. Purchase option d. Capital cost reduction e. Property depreciation cost

d. Capital cost reduction

The loss in the value of an automobile that occurs over its period of ownership is called: a. the market price. b. reinsurance. c. the repurchase commission. d. depreciation. e. the acquisition payment.

d. depreciation.

A foreclosure happens when: a. the borrower is planning to restructure the loan taken for making mortgage payments. b. the value of a house is higher than the loan taken on the property. c. the rates of interest prevalent in the housing market are extremely volatile, forcing the lender to demand additional collateral from the borrower. d. the borrowers repay their housing loan well before the estimated closing period of the loan. e. the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral.

e. the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral.


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