Your Money Test 2 Review
Mortgage Affordability
Customary ratios for conventional mortgage stipulate that payment cannot exceed 30 percent of borrower's gross income.
Open dating is used on
Dairy and Meat
Which of the following is an aspect of asset management accounts
Deposits protected by the Securities Investor Protection Corporation (SIPC)
Before you use credit consider
Do I have an intimate amount of credit
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 provides credit cards and checks to the consumers. c. A consumer loan provides revolving credit to the consumers. d. A consumer loan is used chiefly to make repeated purchases of relatively low-cost goods and services. e. A consumer loan is used to finance the purchase of very expensive items.
E
Cash is the only kind of liquid asset (TorF)
False
FDIC covers stocks, bonds, and mutual funds at purchased banks? (TorF)
False
Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan (TorF)
False
Nondepository institutions are referred to as banks (TorF)
False
Money Market Deposit accounts accounts=bank
Federally insured
Which of the following are protected by the Federal Deposit Insurance Corporation (FDIC)
Money market deposit accounts
Credit users pay stockholders first
NO
Parent Loans for Undergraduate Students (PLUS) loans are made to the parents or legal guardians rather than to the students. (TorF)
True
Paying a loan on schedule is one way to build a good credit history. (TorF)
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 (TorF)
True
The frequency of longer-term installment loans carrying variable interest rates is increasing (TorF)
True
The market price of a house is $125,000 and the home buyer borrows $100,000. Two points are equal to $2,000 (TorF)
True
When one uses 20% of ones take home income is that a bed credit sign? (TorF)
True
Savings will grow faster with monthly interest compounding? (TorF)
True/Daily
Chapter 7 bankruptcy
Walk away. Give assets and liabilities
Negative Amortization
When the principal balance on a mortgage loan increases because the monthly loan payment is lower than the amount of monthly interest being charged
Demand Deposit
When you swipe a credit card Writing a check Making a cash withdraw
Mike has a MasterCard with an annual fee of $25, an 18% interest, and a $1,000 credit limit. He always pays the total outstanding balance monthly. His most recent monthly statement lists the previous month's payment, new charges in the current month totaling $1,500, and a $30 fee. The fee is most likely the result of:
an over-the-limit fee
Jacob has taken an SUV on lease from Free Cruisers Inc. for a period of four years. Jacob does not need to pay any extra amount, based on the residual value of the car, at the end of the fourth year. He has a _____.
closed-end lease
Brokers receive a---- for bringing the loan to the lender.
commission
A _____ loan is intended to help consumers who have an unhealthy credit situation caused by overusing their credit.
consolidation
Chapter 13
wage earner pan. re organize, plan to pay off in 3 to 5 years (effects credit)
Forecast Residual
value of car at end of lease
Ideal debt to income ratio should be
20% or less
Conventional Mortgage
Company does everything for you
Non-Profit
Credit Union
If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 80%, then the borrower must make a down payment of at least
$20,000
Purchase home for $110,000 and make a 10% down payment for one point
$990,000
Which of the following cards provides direct access to your checking account? a. Bank debit cards b. Retail charge cards c. Student credit cards d. Affinity cards e. Reward cards
A
VA loan guarantee
A guarantee offered by the U.S. Veterans Administration to lenders who make qualified mortgage loans to eligible veterans of the U.S. Armed Forces and their unmarried surviving spouses.
Conventional mortgage
A mortgage offered by a lender who assumes all the risk of loss; typically requires a down payment of at least 20 percent of the value of the mortgaged property.
FHA mortgage insurance
A program under which the Federal Housing Administration (FHA)offers lenders mortgage insurance on loans having a high loan-to-value ratio; Its intent is to encourage loans to home buyers who have very little money available for a down payment and closing costs.
Which of the following will lead to a poor credit rating?
Applying for a long-term loan and occasionally being late with a payment
The most common use of consumer loans is to: a. finance college education. b. purchase a car. c. buy furniture. d. buy a house. e. finance a vacation.
B
Low interest rates that have persisted since the financial crisis of 2008-2009 have been beneficial to:
Big Banks
Which of the following is an improper use of credit? a. Buying a home b. Buying a short-lived good c. Spreading payments within a budget d. Purchasing a big-ticket item e. Meeting a financial emergency
Buying a short-lived good
Which is an improper use of credit?
Buying consumable/ non durable goods
Why would you want to rent a house?
Can invest down payment and earn better return than owning a house
The 5 C's
Character, Capacity, Capital, Collateral, Conditions
Mason Corporation borrows funds for the expansion of its business. The loan is secured with the office building. Therefore, the office building serves as _____ for the loan.
Collateral
Interest rates and monthly mortgage wont change over life of mortgage
Fixed Interest Rate
What is a captive finance company?
Ford Motor Credit ( can only use it for Ford)
Plate lady was about to lose her
Home
Which of the following forms of consumer credit is among the cheapest and offers limited tax deductions?
Home equity credit lines
Pay balance off in full to avoid
Interest
Variable rate Loan
Interest rates and payments change periodically
Convenience is a reason for the growth in popularity of:
Internet Banks
Which of the following is an interest-bearing checking account?
Negotiable order of withdrawal (NOW) account
Cants pay back on a single payment loan what should you do?
Negotiate turnover
Fees paid at closing that lower interest rate for mortgage are
Points (pre paid interest)
$11,000 on house worth $110,000 the lenders will
Private mortgage insurance
Time Deposit
Savings account Time Longer you leave money in more you make
STTC or Lock symbol on website means its
Secure
Stock brokerage Firm
Security Firm they market individual stocks and bonds Wells Fargo
Benefits of owning a home
Security and peace of mind, tax shelter, inflation hedge
Sticker price on car
Suggested retail price
A certified check is a personal check that a bank certifies to guarantee that the funds are available (TorF)
True
Always paying cash helps in establishing a high level of creditworthiness. (T or F)
True
CCOA is a nonprofit agency (TorF)
True
Is Credit report used to predict creditworthiness? (TorF)
True
Lenders use the guideline that a borrower's monthly repayment burden should not be more than 20% of the borrower's take-home income. (TorF)
True
Single payment loan
a loan made for a specified period, at the end of which payment is due in full
The price of the car you are leasing is called the
capitalized cost
The loss in the value of an automobile that occurs over its period of ownership is called
depreciation
FICO Score
developed first credit score model
Prequalification
do before buying the home ( financial need)
Mortgage Points
fees charged by lenders at the time that they grant a mortgage loan. Can reduce interest.
Assets management account
for serious traders
Interest begins to accrue right when
get a cash advance
A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.
installment
Fixed cost of auto
insurance for the car
Majority of each monthly payment at the beginning of the loan
interest
The majority of each monthly payment at the beginning of the loan goes to pay the
interest
NOW account
interest baring checking account doesn't add to much don't retire on it
Fixed Loan
interest rate and payment remain the same
Funds
investment company
Cash and near-cash resources are known as:
liquid assets
Credit unions are
member owned financial cooperatives
Credit unions lend money to qualified people who are their:
members
Fixed-Rate Mortgages
most common is 30-years, but 15-year loan becoming more popular. Normally there is no penalty for early payment of loan, thus you can pay off a 30-year mortgage in 15 years if you wish.
Money market mutual funds
must be licensed securities must write a check over $500
Rule of Thumb
never go over 50% of your credit limit
monthly payments should never
not be more than 20% of monthly net income
investment companies
offer money market individual funds
To establish credit, you should first
open savings and checking accounts
Finance charge is calculated on---- and then added to principal
original loan balance
Interest is calculated on the ------each period
outstanding balance
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
If you make a down payment of $11,000 on a house worth $110,000 the lenders will require----- down payment
private mortgage insurance
Adjustable-Rate Mortgages
rate is fixed for a period (say six months or five years) after which the rate may be changed for another term.
Starting a savings program
start once you have a financial goal to meet
Which of the following is the biggest fixed auto ownership cost
the cost of instalment loan payments
A foreclosure happens when:
the lenders attempt to recover loan balances from the insolvent borrowers by forcing the sale of the home pledged as collateral
Commercial banks are able to charge lower interest rates than other lending institutions because:
they usually take only the best credit risks
Capitalized Cost
value of car at beginning of lease