FINANCE CHAPTER 5-6 TEST
If your montly net (after-tax) income is $1,500, what should be your maximum amount spent on credit payments
$300
What would be the maximum limit for an individual's debt-to-equity ratio, excluding the home mortgage?
1.00
Experts usggest that you spend no more than _________________ percent of your net income on credit purhases
20%
The baby boom generation currently represents about 30 percent of the population but holds nearly _________ percent of debt outstanding.
60
Which CD offers a higher rate for every six months that you are invested ?
Bumper-up
A saver will usually earn the highest rate with which one of the following types of savings plans?
Certificate of deposit
What type of account would be considered the most liquid?
Checking account
Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present credit activity?
Credit Bureau
What is the rate that the Federal Reserve charged banks for loans called ?
Discount rate
Which CD pays earnings based on the stock market ?
Indexed
Which of the following is not a deposit institution?
Life insurance company
Which one of the following savings plans is not covered by federal deposit insurance ?
Money market fund with an investment company
What is the rate an individual will pay for borrowing to purchase a new home called ?
Mortgage rate
Hat type of account would you expect to provide the poorest yield ?
Passbook savings account
Which CD attempts to attract savers with gifts or special rates ?
Promotional
Nate rogers deposited $5000 in a 3 year ban CD which pays six percent interest. What type of financial service is Nate using ?
Savings service
When preparing a bank reconciliation, outstanding checks should be:
Subtracted from the bank statement balance
In the back reconciliation process, service fees should be:
Subtracted from the checkbook balance
The purpose of a "special" endorsement for:
Transfer a check to another person
Which of the following is an effective strategy in times of falling interest rates ?
Use short term loans to take advantage of lower rates when you refinance the loans
The expedited funds availability act requires that funds be available to depositors:
Within 2 days for local checks
Kathy purchased a $2000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using:
a closed-end credit.
Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of:
a line of credit
A good example of a closed-end credit is:
a mortgage loan
Comparison of earnings for different savings plans can best be accomplished using the:
annual percentage yield
An all-purpose account that provides several services is an:
asset management account
Mortgage loans, automobile loans, and installment loans for purchasing furniture or appliances are examples of:
closed-end credit
Traditionally, the greatest variety of financial services is offered by:
commercial banks
The Federal Deposit Insurance Corporation provides deposit insurance for:
commercial banks and savings and loan associations
In recent years membership in credit unions has
continued to increase
Consumer Credit:
dates back to colonial times
The debit card:
debits your account at the moment you buy goods or services
The profits from a mutual savings bank go to the:
depositors
Installment cash credit is a:
direct loan of money for personal purposes
Although credit permits more immediate satisfaction of needs and desires, it:
does not increase total purchasing power
T or F: A regular savings account usually offers a higher rate of return to savers than other savings plans
false
T or F: College students are not a prime target for credit card issuers
false
T or F: In a close-end credit, loans are made on a continuous basis and you make at least partial payment
false
T or F: Most economists do not recognize consumer credit as a major force in the American economy
false
T or F: When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance
false
T or F: With an open-end credit, you pay back one-time loans in a specified period of time in equal amounts
false
By paying cash for a purchase, you:
forgo the opportunity to keep the cash in an interest-bearing account
Another name for closed-end credit is:
installment credit
A certificate of deposit usually has:
limited liquidity
The maximum amount of credit you are allowed by a creditor is called an:
line of credit
installment sales credit is a:
loan that allows you to receive merchandise such as a refrigerator or furniture
An advantage credit unions may have over other financial institutions is:
low-cost personal loans
In determining your credit capacity, you first provide for basic necessities, such as:
mortgage or rent
Revolving check credit is a:
prearranged loan for a specified amount that you can use by writing a special check
Another name for open-end credit is:
revolving credit
Time deposits are another name for:
savings accounts
A savings account at a credit union is called a ______________ account
shared certificate
Michael purchases a laptop computer from Best Buy. He will make one big payment without paying any interest as long as he pays it on or before August 15. This is an example of:
single lump-sum credit
Which federal law regulates the use of credit reports, requires the deletion of obsolete information, and gives you access to your file?
the Fair credit Reporting Act of 1971
A good example of an open-end credit is:
the use of a bank credit card to make a purchase
The purpose of a debit card is to:
transfer money electronically
T or F: "Shopaholics" and young adults are most vulnerable to misusing credit
true
T or F: A "free" checking account with a minimum balance $500 has an opportunity cost of lost interest
true
T or F: A restrictive endorsement will usually include the words "for deposit only"
true
T or F: All-in-one accounts may be used by financial institutions to simplify the maze of financial services and to attract customers
true
T or F: Although credit allows more immediate satisfactory of needs and desires, it does not increase a total purchasing power.
true
T or F: An asset management account combines several financial services for a single fee.
true
T or F: Close-end in credit is used for a specific purpose and involves a specified amount
true
T or F: Consumer credit dates back to colonial time
true
T or F: Consumer credit is based on trust in people's ability and willingness to pay bills when due
true
T or F: Consumer credit refers to the use of credit for personal needs (except a home mortgage) by individuals.
true
T or F: Credit is an arrangement to receive cash, goods, or services now and pay for them in the future
true
T or F: Credit unions frequently offer lower loan rates than other financial institutions
true
T or F: Credit when effectively used, can help you have more and enjoy more.
true
T or F: In a closed-end credit, generally the seller holds title to the merchandise until the payments have been completed
true
T or F: It is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash
true
T or F: Perhaps the greatest disadvantage of using credit is the temptation to overspend
true
T or F: Savings and loan associations offer mortgages
true
T or F: The money market fund offered by investment companies is a relatively liquid financial service
true
T or F: Using a "debit" card is basically the same as writing a check
true
When did installment credit explode on the American scene?
with the advent of the automobile in the early 1900s
The rate of return on a savings account is also referred to as:
yield
If you cosign a loan:
you'll have to pay up to the full amount of the debt if the borrower does not pay
