Your Money & Credit Test 2

An individual can be overusing credit even if he or she can afford to make the minimum monthly payments on time (T/F)

True

Interest earned for a period should be added to the ending balance shown in your checkbook while reconciling your account.(T/F)

True

Keeping valuables in a safe-deposit box may reduce your homeowner's insurance premium by eliminating the "riders" that are often needed to cover such items. (T/F)

True

Most consumer loans are made at fixed rates of interest. (T/F)

True

One can hold a credit card issued by a stock brokerage firm. (T/F)

True

Prequalification provides a home buyer with information regarding the specific mortgage amounts he or she is eligible for subject to the expected changes in interest rates. (T/F)

True

Rebates are always more cost effective than the 0% annual percentage rate (APR) loans offered on automobile loans.(T/F)

True

The cash value of some types of life insurance policies can be used as collateral for loans. (T/F)

True

The property listing in a local Multiple Listing Service (MLS) cannot be accessed by all buyers and sellers. (T/F)

True

An arrangement for scheduled debt repayment over future years that is an alternative to straight bankruptcy; used when a person has a steady source of income and there is a reasonable chance of repayment within 3 to 5 years.

Wage Earner Plan

A loan rollover means that:

the loan is paid off by taking out another loan.

When comparing two installment loans with the same principal and annual percentage rate (APR), the loan with:

the longer maturity will have the lower monthly payment and the higher total costs

The most expensive method for determining finance charges on revolving credit would be the:

Average Daily Balance method including new purchases

Which of the following statements regarding a consumer loan is true? a. A consumer loan results from a rather informal process and involves no negotiated contracts. b. A consumer loan is used to finance the purchase of very expensive items. c. A consumer loan provides revolving credit to the consumers. d. A consumer loan provides credit cards and checks to the consumers. e. A consumer loan is used chiefly to make repeated purchases of relatively low-cost goods and services.

B

Which of the following cards provides direct access to your checking account?

Bank Debit Cards

The financial crisis of 2008-2009 followed by low interest rates has been beneficial to:

Borrowers

In a co-op, the buyer receives title to a unit and joint ownership of the common areas. (T/F)

False

In most cases, lenders take the physical property used as collateral from the borrower and liquidate the collateral until the loan is repaid in a lump sum. (T/F)

False

The Federal Deposit Insurance Corporation (FDIC) covers consumer accounts at credit unions. (T/F)

False

You can borrow, repay, and reborrow from a home equity loan in the same way as you can from a home equity credit line. (T/F)

False

If the interest rate and monthly mortgage payment do not change over the life of your mortgage, you have a(n):

Fixed-rate Mortgage

Janey makes frequent small purchases and pays off the total outstanding balance on her credit card every month. Which of the following features is most attractive to her when searching for a credit card provider?

No annual fee

A(n) _____ ratio specifies the maximum percentage of the value of a property that a lender is willing to loan.

Loan to Value

Variable auto ownership costs are dependent on the:

Miles covered by the automobile

Allow check writing above a stipulated minimum amount

Money Market Mutual Funds

Most loans made by savings and loan associations are:

Mortgage Loans

Fees charged by lenders at the time they grant a mortgage loan are called:

Mortgage Points

Consist of a comprehensive listing of properties for sale in a given community area.

Multiple Listing Service (MLS)

The monthly interest on your adjustable-rate mortgage was $690. You paid $650 as your monthly payment on the loan leading to an increase in the principal balance. This is an example of a(n):

Negative Amortization

Earnest money is the sum of money the home buyer pledges with the:

Seller to indicate the intent to purchase

A customer withdraws funds by writing checks from his or her negotiable order of withdrawal (NOW) account and:

Share Draft Account

What kind of bankruptcy results in the loss of all the assets of a debtor.

Straight Bankruptcy

The cost of credit generally increases with the length of the repayment period. (T/F)

T

The market price of a house is $125,000, and the home buyer borrows $100,000. Two points are equal to $2,000. (T/F)

T

It cost financial institutions more if they perform:

Teller Transactions

Which of the following statements regarding credit unions is true? a. They provide installment loans to their members. b. They charge higher interest rates than other sources of consumer loans. c. They are owned and managed by the government. d. They are profit-making organizations. e. They make secured loans only to non-members.

They provide installment loans to their customers

You are going on an overseas trip, and you want to carry checks. You should purchase:

Traveler's checks

Cash and Near Cash resources are known as:

Liquid assets

Sheldon has a home valued at $108,000 with an outstanding mortgage of $70,000. If his lender is willing to provide a home equity loan of up to 80% of the market value of his home, how much can Sheldon borrow using a home equity loan?

$16,400 (($108,000 × 80%) - $70,000 = $86,400 - $70,000 = $16,400.)

Alice lost her EFTS card and reported it missing the next day. She found that $800 had been withdrawn from her savings account. Alice's loss is equal to:

$50

Macie has $25 in her checking account when her EFTS card and PIN are stolen. If Macie notifies her bank tomorrow, the day after the theft of her card, her loss is limited to:

$50

If Liza's debt safety ratio is 15% and her monthly take-home pay is $4,500, which of the following equals her total monthly payments?

$675 (Total Monthly Payments ÷ Monthly Take-Home Pay)

At maturity, a deposit of $6,000 in a certificate of deposit (CD) for 10 years at 3% will be worth:

$8,064

Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires that the total installment of loan payments does not exceed 35% of the monthly income. Based on Barb and Bob's financial data given below, what is the maximum monthly mortgage payment for which they can qualify? (Monthly gross income$4,000Car payment 350Student loan payment 200)

$860

The annual percentage rate (APR) on a single-payment loan of $1,000 at a simple interest rate of 12% is:

12%

Which of the following is a nondepository institution? a. A savings and loan association b. A consumer finance company c. A credit union d. A commercial bank e. A savings bank

A consumer finance company

Which of the following statements regarding loan collateral is true? a. Collateral is an item of value used to secure the interest portion of a loan. b. Loans secured by collateral always have higher finance charges than unsecured loans. c. Collateral is an item of value used to secure the principal portion of a loan. d. Loans are secured by collateral that is readily marketable at a price high enough to cover the interest portion of the loan. e. Collateral is always required by banks to lend to customers with good credit rating

C

Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty.

Certificate of Deposit

Straight bankruptcy is allowed under _____ of the bankruptcy code.

Chapter 7

What eliminates most of the financial obligations of the borrower

Chapter 7 bankruptcy

_____ are the expenses that borrowers pay during the final step of a real estate purchase.

Closing Cost

Most single-payment loans are secured by:

Collateral

Factors that typically influence the choice of where to maintain a checking account are:

Convenience, services, and cost

Which of the following sources of consumer loans often has the most favorable terms for borrowers? a. Asset management companies b. Savings and loan associations c. Commercial banks d. Credit unions e. Consumer finance companies

Credit Unions

A(n) _____ is a type of reporting agency that collects and sells credit information about individual borrowers.

Credit bureau

Which of the following is a feature of a home equity loan? a. A home equity loan is generally the first mortgage loan. b. A home equity loan is a single-payment loan. c. The interest rate on a home equity loan is higher than that on other loans. d. The interest paid on a home equity loan is tax deductible. e. A home equity loan is an unsecured loan.

D

A payment made using a(n) _____ is equivalent to paying by cash.

Debit Card

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a card that will provide direct access to his checking account. James should get a:

Debit Card

When a savings bank is a mutual association, it is owned by the:

Depositors

Which of the following is an aspect of asset management accounts?

Deposits protected by the Securities Investor Protection Corporation (SIPC)

The loss in the value of an automobile that occurs over its period of ownership is called:

Depreciation

Which of the following statements regarding single-payment loans is true? a. They are usually provided by retailers. b. They are provided by sales finance companies. c. They are generally used to finance auto purchases. d. They are generally unsecured and do not have any collateral. e. They usually mature in 1 year or less.

E

All credit cards have annual fees. (T/F)

False

What happens when the lenders attempts to recover loan balances from the insolvent borrowers to force the sale of the home pledged as collateral.

Foreclosure

Most lenders immediately will _____ the first time that you have difficulty meeting your loan payments.

Grant an extension

The decision about whether or not to grant you credit will be made by:

Individual Creditors

When canceling a credit card, you should cut up the card and _____ that you are canceling your account.

Inform the issuer in writing

The majority of each monthly payment at the beginning of the loan goes to pay the:

Interest

A safe-deposit box in a bank can be opened only when the:

Keys of both the banker and the account holder are used

William uses his bank credit card frequently; however, he always pays off the total outstanding balance on the card each month. What should William look for in a credit card given the way he uses one?

No annual fee and a grace period

______ offer banking services but do not accept deposits like traditional banks.

Non depository Institutions

Any credit card purchase will effectively be an interest-free loan if you have a zero balance when the grace period begins and you:

Pay off the entire balance on or before the due date

Pretending to be an employee of a financial institution

Phishing

Matt is considering the purchase of a condo on a mortgage. However, he is not sure of the amount of the mortgage he is eligible for. _____ will help him identify and correct any problems such as credit report errors that may arise on his application.

Prequalification

The _____ governs closings on owner-occupied houses, condominiums, and apartment buildings of four units or fewer.

Real Estate Settlement Procedures Act

An escrow account is used to collect _____ from one's monthly mortgage payment.

Real Estate Taxes

If you don't have much down payment money, a _____ can effectively act as the cheapest source of down payment.

Rebate

A check you issued last week has been stolen. You can prevent the amount on the check from being withdrawn from your account by an unauthorized person by:

Requesting a stop payment

When you lease your apartment from a nonprofit corporation that owns the building and you own a share of the nonprofit corporation, you own a:

cooperative Apartment