Finance Exam 2

People with the best credit scores use how much of their credit limits? a. <50% b. <7% c. <30% d. <10%

b

To keep your costs down when paying off a credit card, it is best to a. make only the minimum payments b. pay it off in full c. pay it off in four big installments d. pay it off in two installments

b

What are the 5 Cs of the credit decision? a. contacts, conditions, collateral, co-signer, and capacity b. character, capacity, collateral, capital, and conditions c. cost, contacts, conditions, collateral, and capital d. none

b

What is a sublease? a. Having someone renting below you in the building b. The transfer of a lease agreement to a new tenant c. The extending of a lease d. All of the choices are incorrect.

b

What is predatory lending? a. lending money to borrowers at an extremely low interest rate b. the act of lending money at an unreasonably high interest rate, making payments excessively difficult or impossible for the borrowers

b

What is the difference between federal and subsidized and unsubsidized loan a. subsidized loans of not require payments until 12 months after graduation, whereas unsubsidized loans require repayment immediately upon graduation b. with a subsidized loan, the interest on the loan is paid by the government if the student is enrolled in school at half-time status or greater; an unsubsidized loan requires the student to pay the interest on the loan that has accrued while still in school

b

What percent of the FICO score comes from your length of credit history a. 10% b. 15% c. 30% d. 35%

b

Which is true when trying to get a loan? a. higher the risk, lower the rate b. higher the risk, higher the rate c. lower the risk, higher the rate d. risk and rate are unrelated

b

Which two Cs are the most important in the 5 Cs of credit? a. capital and collateral b. character and capacity c. capital and conditions d. character and conditions

b

Which type of payment option postpones the repayment of principal for a certain time period? a. student loan refinancing b. deferment c. forbearance d. student loan refinancing and forbearance

b

How many years does negative info stay on credit report a. 5 b. 7 c. 11 d. 15

b

Car lease payments are usually a. lower than loan payments. b. higher than loan payments. c. never a good investment. d. about the same as loan payments.

a

If you buy a car with a secured credit loan, what will be the collateral? a. the car b. your house c. your signature d. stock

a

What is a mortgage? a. The legal document used to allow a lender to use real property as collateral b. The difference between what is owned vs. what is owed c. The transfer of a lease agreement to a new tenant d. All of the choices are incorrect.

a

What is an adjustable-rate mortgage (ARM)? a. A home loan in which the interest rate varies based on a benchmark plus an additional spread, called an ARM margin; also known as a "variable-rate mortgage" or a "floating-rate mortgage" b. A loan that has a specified payment amount and a specified repayment schedule c. A ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property d. A mortgage with a strict rate

a

What is the first step in the auto-purchasing process? a. Analyzing needs versus wants b. Do your homework c. Determining what you can afford d. Comparison shopping

a

What is the simplest, most common form of debt? a. credit cards b. student loans c. car loans d. house loans

a

What is the term used to describe the state of having an outstanding balance on credit cards that is barely reduced over decades because a person is only making minimum payments and being charged a high annual percentage rate? a. perma-debt b. balance maintenance c. savings d. budget

a

What term best describes an unsecured loan where a guarantee of payment is based on your word? a. signature loan b. verbal loan c. margin loan d. credit loan

a

Which is not a way to comparison shop for a car? a. If you like the car, buy it b. Check private sales c. Check dealerships d. Test drive the car

a

Why is it important to establish a credit history? a. to demonstrate responsibility with credit b. to experience perma-debt c. to go into outstanding debt d. none

a

Define grace period a. the amount of time you can't spend money b. the amount of time you have to pay your bill before finance charges are activated c. the amount of time you have to pay your bill after finances charges have been made d. the period in which you owe interest

b

An adjustable-rate mortgage (ARM) is defined as a. insurance for the lender if it needs to foreclose on your home and the sale of the home does not cover the mortgage and the cost of the foreclosure. b. a loan that has a specified payment amount and a specified repayment schedule. c. a home loan where the interest rate varies based on a benchmark plus an additional spread. d. a ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property.

c

At what life stage do most people buy their first home? a. Retirement b. Independent c. Early family d. Late family

c

FICO scores range between a. 100-900 b. 250-800 c. 300-850 d. 0-1000

c

How many free credit reports can you receive in a year a. 1 b. 2 c. 3 d. 4

c

How much of a down payment do lenders require when purchasing a car? a. 10% b. 15% c. 20% d. 40%

c

In the event that you fail to make a payment ___________ credit cards may take funds from your savings account a. unsecured b. revolving c. secured d. platinum

c

Interest rates on credit cards are a. fixed b. variable c. fixed and/or variable d. none

c

People who are lured by credit cards or other types of credit and get to the point where they have such large outstanding balances that they will never get out of debt fall into a. transferring the balances constantly b. credit reporting c. perma-debt d. credit score

c

Stealing credit card information by swiping it through a processing machine that gathers information is called a. phising b. identity theft c. skimming d. equity

c

What does APR stand for? a. automatic pay raises b. auto payment rates c. annual percentage rate d. annual pay rate

c

What is the disadvantage to buying a home? a. The value of your house may increase. b. Eventually, you will be able to live payment-free. c. The value of your house may decrease. d. You will gain equity by paying down your mortgage.

c

What is your finance charge? a. interest on credit cards b. fees on credit cards c. total cost of borrowing on your card d. monthly rate

c

Which of the following is more likely to charge you more money when you buy a car? a. An ad in the paper b. An ad on Craigslist c. Your local car dealership d. A sign in a car window

c

Which of the following is not a step that you should take before you purchase an automobile? a. Negotiate the deal b. Do your homework c. Pay the sticker price d. Shop for financing

c

Who do credit card companies really like to entice with "free" items like t-shirts a. people in retirement b. empty nesters c. college students d. fitness advocates

c

A new car depreciates _________________ to _________________ in the first three years of ownership. a. 50%; 60% b. 25%; 40% c. 35%; 40% d. 40%; 50%

d

All of the following can be found on your credit report with the exception of a. payment history b. recent balance and required payment c. the date an account was opened d. your annual salary

d

Real estate commissions are a. at least 7% of the mortgage. b. fixed by the banking commission. c. based upon the equity in your home. d. usually between 5 and 7 percent of the mortgage.

d

What are the last two steps in the auto-purchase process? a. Analyze needs versus wants and do your homework b. Comparison shop and negotiate a deal c. Do your homework and comparison shop d. Close the deal and complete after-sale activities

d

What credit score range helps to lower the interest rate and speed up your credit approval in purchasing a home? a. 500-600 b. 601-700 c. 701-759 d. 760-850

d

What is contained in a credit report a. bankruptcy records b. unpaid child support c. addresses d. all of the options are correct

d

What is credit? a. type of card b. the same as debit c. a contractual agreement in which a borrower receives assets upon full payment over a period of time d. a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest

d

When looking into buying or leasing a car, what criteria are compared when "doing the homework"? a. New versus used b. Price and insurance cost c. Reliability and service records d. All choices are correct.

d

When picking out a car and determining needs versus wants, a person should ask him or herself all of the following questions except: a. How much cargo do you carry? b. Do you want a manual or automatic transmission? c. Do you need two-wheel drive, all-wheel drive, or four-wheel drive? d. All choices are correct.

d

Which credit card is accepted worldwide? a. visa b. mastercard c. discover d. vis and mastercard

d

Which is not part of the 5 Cs of the credit decision? a. character b. capacity c. conditions d. contacts

d

Which of the following are credit reporting agencies a. equifax b. transunion c. experian d. all of the above

d

Which of the following are helpful in keeping your credit card rates and fees low? a. make every payment on time b. maintain a balance that is less than 30% of your credit line c. carefully read monthly statements for additional fees and read mail regarding adjustment notices d. all of the options are correct

d

Which of the following are true in regard to leasing a vehicle? a. You are in a long-term rental agreement with a limit on the number of miles you can drive without penalty. b. A security deposit is required at the signing of the lease and then monthly payments are required. c. At the end of the lease, you return the car; at that time, you have the option of purchasing the vehicle. d. All answers are correct.

d

Which of the following are true regarding secured credit cards? a. a secured credit card requires a security deposit equalling the credit limit of the card b. if payments are not received, the credit card company can receive its money by cashing in the security deposit c. secured credit cards are ideal for those who are starting to build credit or who are trying to rebuild their credit history d. all of the options are correct

d

Which of the following are ways to improve your FICO credit score? a. pay your bills on time b. limit the number of new credit accounts c. keep credit card balances low d. all of the options are correct

d

Which of the following best defines a secured credit card? a. the credit card company allows you to borrow money based on your promise to repay b. it requires a security deposit equalling the credit limit of the credit card c. it is useful for those just starting to build credit d. requires a security deposit AND is useful for building credit

d

Which of the following is an advantage of renting? a. You can personalize your living space. b. It can provide tax advantages. c. You can gain equity. d. There are no unexpected home-repair bills.

d

Which of the following is not a step toward purchasing an automobile? a. Determine affordability b. Shop for financing c. Analyze needs versus wants d. Make a preliminary offer

d

Which of the following is not included in a credit report a. date opened b. last date reported c. monthly payments d. salary information

d

With the Credit Card Act of 2009, credit card companies a. cannot offer credit cards on campus b. can only offer incentives under $25 c. can only offer incentives if they are least 500 feet from campus d. require that you have a source of income or receive a signature from a cosigner if you do not have that income source

d