EXAM 2 FINANCE
as a percentage of take home pay, monthly consumer credit payments should not exceed
25%
Earnest Money
A sum of money given to bind an offer or agreement.
which of the following does a leader look at before granting credit to an applicant ?
AGE
Are the credit cards issued in conjunctions with a sponsoring group - most commonly some type of charitable, political or professional organization
Affinity cards
Low interest rates that have persisted since
BIG BANKS
what is the reason that people use credit?
Being able to meet a financial emergency
which of the following is an example of down payment that lower the potential depreciation and therefore your monthly lease payments on a leased car?
CAPITAL COST REDUCTION
The financing rate on a lease is called the
CAPTALIZED COST
low interest rates
Federal Reserve kept interest rates low; companies borrowed money and expanded more than necessary
Closing costs
Fees and charges associated with the purchase of a property
which of the following forms of consumer credit is among the cheapest and offers limited tax deductions ?
Home equity credit lines
Straight Mortgage
Interest only paid during life of loan. Full principal payment due at end of term.
the least expensive method for banks
Internet
Laura has a $100,000 balance in her checking account at Best Bank, and she has purchased a certificate of deposit (CD) worth $50,000 issued by Best Bank. Laura is also thinking of investing $200,000 either in Best Bank or in Trust Bank. Which of the following is a suitable strategy for Laura if she wants her deposits to be completely insured?
Laura should invest $10,000 in a money market deposit account of best bank
Assume that you have taken a car on a close end lease for a period of 5 years. At the end of the 5th year, you need to pay additional $ only when:
Milage limits are exceeded
the monthly interest on your adjustable rate mortgage was $690..
NEGATIVE AMORTIZATION
outstanding checks
checks that have not been deducted from the bank statement balance.
With prequalification, a buyer can
correct in advance any problems on his credit report
is a type of reporting agency that collects and sells credit info about individual borrowers
credit bureau
capitalized cost
the price of a car that is being leased
Cash Management
the routine, day-to-day administration of cash and near-cash resources, also known as liquid assets, by an individual or family
which of the following statements regarding low interest is true ?
they encourage investors to search for stocks paying high dividends
The first step in the auto-buying process should be:
to analyze how much you can afford to spend on the car
which of the following is usually excluded from a monthly credit card statement ?
types of goods purchased
A proper use of open account credit wold be to buy a
washing machine
If your monthly before-tax income is $2,000 and your monthly take-home pay is $1,500, your maximum monthly consumer credit payments should not exceed
$300
Mary has calculated her adjusted balance as $500. She notices that her bank's service charges are $20 for this period. Mary's ending balance in her bank account is _____.
$480
The purchase price of the house you are buying is 100,000$. A loan-to-value-ratio of 50$ will require a down payment of:
$20,000
is the maximum loan value ratio that a lander....
$20,000
A payment made using a ........ is equivalent to paying by cash
DEBIT CARD
James finds it difficult to manage credit but wants to get a card that will provide direct access to his checking account. James should get
DEBIT CARD
The loss in the value of an automobile that occurs over its period of ownership is called:
Depreciation
Christina's bank allows her employer to directly deposit her paycheck into her personal bank account. This service provided by Christina's bank is called a(n):
EFTS electronic funds transfer system
Cash is the only kind of liquid asset
FALSE
Which of the following is a result of excess unused credit capacity?
FICO score reduction
Jane and Smith are considering the purchase of a home in downtown Minneapolis. They approached Larson's Mortgagers Inc. to arrange for the financing needed for their home. This process of arranging with a mortgage lender in advance of buying a home is called _____.
PREQUALIFICATION
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
capital cost reduction
Payment similar to down payment that results in lower monthly payment
which of the following modes of identify theft involves thieves obtaining your personal info from financial institutions and other sources under false pretenses ?
Pretexting
...... are ongoing costs of home ownership
Property taxes \ insurance
which of the following cards is issued as a form of credit by department stores and all companies ?
RETAIL CHARGE CARD
An escrow account is used to collect
Real estate taxes
A frequent flyer card can be aptly classified as a
Reward card
Retail charge cards are advantages to merchants because:
SHOWS CUSTOMER LOYALTY
borrower
Someone who receives something with a promise to return it or its equivalent
Cash management helps in financial planning
TRUE
Prequalification provides a home buyer info regarding specific mortgage amount they will be eligible for subject to expected charges in interest rates
TRUE
The majority of persons filling for bankruptcy chose chapter 7 of the U.S bankruptcy code
TRUE
negative equity
The situation where a mortgage loan is bigger than the value of the property.
Which of the following statements regarding safe deposit boxes is true ?
They can be used a sa storage
Anchoring
a behavioral bias in which an individual tends to allow an initial estimate (of value or price) to dominate the subsequent assessment (of value or price) regardless of new information to the contrary
checkbook ledger
a booklet, provided with a supply of checks, used to maintain accurate records of all checking account transactions
Foreclosure
a lender taking over ownership of a property from an owner who has not made loan payments
Close-end credit
a loan for a specific amount that must be repaid, in full, including all finance charges, by a stated due date
with a bank credit card you can often avoid interest charges if:
amount balance is paid in full every month
The FICO credit scoring system assigns point according to
amounts owed
stop payment
an order for a bank not to cash a particular check
Liquid assets include?
any assets that can readily be converted to cash.
which of the following will lead to a poor credit rating?
applying for a long term loan and occasionally
which of the following will lead to a poor credit rating ?
applying fro long-term loan and occasionally being late with payment
interest rate
are the lowest on regular checking account
which of the following cards provides direct access to your checking account ?
bank debit card
... is a reason people use credit
being able to increase disposable income
It is good to use credit for:
buying a car
which of the following is an improper use of credit?
buying a short live good
Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty.
certificate of deposit
compared to other depositary financial institutions, credit unions
charge lower rate on loans to their members
chapter 7 of the bankruptcy code:
eliminates most of the financial obligations of the borrowers
a veteran might be able to buy a home with no down payment with a
graduated payment mortgage
condominium
housing consisting of a complex of dwelling units (as an apartment house) in which each unit is individually owned
The majority of each monthly payment at the beginning of the loan goes to pay the:
interest
convenience is a reason for the growth of
internal banks
Cash and near-cash resources are known as _____.
liquid assets
Credit unions are:
member owned financial cooperatives (properties)
If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 80 percent, then the borrower must make a down payment of at least
minimum down payment of 10,000$
which of the following is the correct formula for calculating the debt safety ratio ?
monthly take home pay + total monthly consumer credit payments
You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You have
negative amortization
which of the following is a major reason to use credit?
occasionally for convenience
nondepository institutions
offer banking services but do not accept...
to establish credit you should first
open savings and checking accounts
Kate tends to issue checks quite often without having sufficient balance in her account. She should look for an account with a(n) ___ facility.
overdraft protection
the more frequently a ban compounds interest,
the higher the effective rate for a given nominal rate will be
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
which of the following is not requested in a typical credit card application?
political afflictions
If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ as a result of the size of the down payment.
private mortgage insurance
Fredrick purchased a property worth $150,000 on mortgage. He had paid $30,000 as a down payment on this property. However, because of a recent slump in the real estate prices, the property is worth only $110,000, forcing Fredrick to sell the property. Assuming that no mortgage payments have been made by Fredrick, this sale is termed a(an) _____.
real estate short sale
the seller of a house typically pays the :
real estates agents commission
if the information is in an individual borrower's credit report contains an error, he or she is entitled to:
request a correction
Factors that typically influence the choice of where to maintain a checking account are:
services, insurance, cost
A real estate sales contract will include
the amount you have paid as an earnest money deposit
which of the following statements about scoring systems is true?
the credit scoring system is based on extensive statistical studies.
money factor
the financing rate on a lease; similar to the interest rate on a loan