FINC 300 - Final Exam
Most credit cards have a ________ grace period from the date of the bill to make payments. A. 21 to 25−day B. 31 to 35−day C. 5 to 20−day D. 1 to 15−day
A. 21 to 25−day
Most grace periods are A. 21−25 days. B. 7−10 days. C. 30 days. D. 14−21 days.
A. 21−25 days.
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act established fee caps for cards. Card fees cannot total more than ________ of the initial credit limit. A. 25 percent B. 40 percent C. 45 percent D. 60 percent
A. 25 percent
Which of the following is the correct formula to calculate the after−tax cost of a home equity loan? A. After−tax cost of a home equity loan = before−tax cost (1 − marginal tax rate) B. After−tax cost of a home equity loan = before−tax cost (1 + marginal tax rate)
A. After−tax cost of a home equity loan = before−tax cost (1 − marginal tax rate)
Which method sums the outstanding balances owed each day during the billing period and divides by the number of days in the period? A. Average daily balance B. Previous balance C. Simple interest D. Balance calculation method E. Adjusted balance
A. Average daily balance
Which of the following financial institutions is a not−for−profit organization that is open only to members of that institution and tends to offer more favorable interest rates to borrowers and savers? A. Credit union B. Commercial bank C. Savings bank D. Savings and loan association E. None of the above are correct.
A. Credit union
What is the type of loan where the entire interest charge is subtracted from the loan principal before you receive the money, and at maturity you repay the entire principal? A. Discount method B. Add−on method C. Simple interest method D. Partial amortization method E. None of the above
A. Discount method
A key to negotiating a good price is? A. Knowing the markup B. Knowing how many are in stock C. Knowing the retailers revenue D. Knowing the sales person
A. Knowing the markup
Which of the following is the largest factor in determining credit? A. Payment history B. Types of credit used C. Amount owed D. New Credit
A. Payment history
The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover short−term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. Which of the following is not an advantage of a CD as a cash management alternative for John and Maile? A. Pays money market interest rates B. High interest rate C. Lends itself well to automated payroll deduction plan D. Fixed rate of interest E. It is insured.
A. Pays money market interest rates
Please choose the method to use when calculating the after-tax return. A. Taxable return × (1 − marginal tax rate) + nontaxable return B. Taxable return (marginal tax rate − 1) − nontaxable return C. Taxable return (1 + marginal tax rate) -nontaxable return D. Nontaxable return (1 − marginal tax rate) + taxable return E. Nontaxable return (1 + marginal tax rate) − taxable return
A. Taxable return × (1 − marginal tax rate) + nontaxable return
You have been having significant problems with your new car. Every time you turn around something is breaking or not working properly. Fortunately, the "lemon laws" are there to help. Which of the following is not one of the criteria for application of the lemon laws? A. You must return the vehicle to the original dealership. B. You have under 12,000 miles on the car. C. Your car has been out of service for at least 30 days during the first year after purchase. D. You have made at least four attempts to solve the problem.
A. You must return the vehicle to the original dealership.
With a(n) ________ installment loan, interest charges are calculated using the original balance, and these charges are then added to the loan. A. add−on method B. discount method C. simple interest method D. partial amortization method E. none of the above
A. add−on method
Credit cards issued in conjunction with particular charities or organizations, like the Sierra Club or the Humane Society, that send a portion of their annual fee or percentage of their purchases back to the sponsoring organization are known as A. affinity cards. B. prestige cards. C. premium cards. D. secured credit cards.
A. affinity cards.
Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment by the due date. Technically, you A. are in default. B. are bankrupt. C. are usually not given a chance to make good on the overdue payment. D. none of the above
A. are in default.
Changes to your credit card policies and rates are usually announced via "________"; which are notices enclosed with your bill. A. bill stuffers B. regal notices C. policy wards D. bill addendums
A. bill stuffers
Consider the "Five Cs of Credit." The category that considers the size of your investment holding or portfolio is A. capital. B. capacity. C. character. D. collateral. E. none of the above.
A. capital.
All of the following are advantages of renting versus buying a home except A. control over remodeling and decorating decisions. B. no property taxes. C. no risk of falling housing prices. D. not responsible for home repairs or maintenance. E. mobility.
A. control over remodeling and decorating decisions.
Debt consolidation loans are very appealing because A. they offer hope to those who can't keep up with their current payment schedules. B. they offer liquidation to those who are in good standing with their creditors. C. they offer relinquishment of all debts and financial obligations to those who can't keep up with their current payment schedules. D. all of the above
A. they offer hope to those who can't keep up with their current payment schedules.
In 2017 the average APR on standard variable−rate credit cards was A. 16.0%. B. 15.5%. C. 19.0%. D. 17.2%.
A. 16.0%.
Josh was sued by his former business partner. He lost the case and has to pay his former partner $10,000. He has not yet done so and is refusing to do so. Josh is applying for a mortgage for a new home. Should he be worried about the lawsuit impacting his mortgage application? A. Absolutely, this kind of information is contained on one's credit report. B. No, this kind of information is not contained on one's credit report.
A. Absolutely, this kind of information is contained on one's credit report.
The FDIC and the National Credit Union Association insures accounts up to A. $270,000. B. $250,000. C. $300,000. D. $150,000.
B. $250,000.
A 2016 TD Ameritrade survey found what percent of respondents said that credit card debt would make them less likely to date someone? A. 22 B. 44 C. 12 D. 33
B. 44
The choice of a credit card is a matter of personal credit card philosophy. If you are a credit user, the most important decision factor is the card's A. minimum payment. B. APR on the unpaid balance. C. length of grace period. D. late payment fee. E. annual fee.
B. APR on the unpaid balance.
When you are considering different investment options and want to maximize your returns, be sure to compare the investments' A. quoted rates. B. APYs. C. APRs. D. None of the above
B. APYs.
Private mortgage insurance typically is not needed with a down payment of 20% or larger. Why? A. Buyers who have large down payments don't choose the extra insurance. B. Buyers who invest large down payments are more motivated to make their mortgage payments. C. Not true, all mortgage loans require PMI. D. All of the above E. None of the above
B. Buyers who invest large down payments are more motivated to make their mortgage payments.
________ is not information generally found in your credit report. A. Personal credit history B. College attended, grades, etc. C. Your public financial history D. Past inquiries regarding your credit report E. Employment information
B. College attended, grades, etc.
What is not a benefit normally associated with home ownership? A. Tax advantages for those who qualify B. Flexibility to respond to employment opportunities C. Ability to build equity and net worth D. A potential source of collateral for future loans
B. Flexibility to respond to employment opportunities
Pick the advantage of a certificates of deposit from this list of possibilities. A. The interest paid is compounded daily. B. Interest rates are generally higher than typical savings accounts. C. Early withdrawals after 30 days do not incur a penalty. D. They earn the APY and not the APR.
B. Interest rates are generally higher than typical savings accounts.
What is another name for an interest−bearing checking account? A. DIFI B. NOW C. CWI D. IBC
B. NOW
Sharry is interested in buying her first home. Currently her monthly gross income is $3,000. From this she makes a car payment of $240, a personal loan payment of $300 and a student loan payment of $85. Based on this information would a bank approve Sharry for a mortgage? A. Yes B. No
B. No
Which of the following is not a recurring housing cost? A. Maintenance and operating costs B. Points C. PITI D. Homeowner's insurance E. Mortgage payments
B. Points
Which of the following is not a one−time fee connected with purchasing a house? A. Points B. Private mortgage insurance C. Closing costs D. Down payment E. Origination fee
B. Private mortgage insurance
You are headed to the mountains for some climbing this summer and you need some gear. The local mountaineering shop is offering 6% financing on all purchases before the end of the month. Your savings account is currently paying 5%, and you are in a marginal tax bracket of 28%. Which of the following is true? A. It does not matter where you get the money; it will cost the same. B. Take the money out of savings — it is cheaper. C. You should seek competent financial help. D. Borrow from the mountain shop — it is cheaper. E. None of the above are true.
B. Take the money out of savings — it is cheaper.
Which of the following is not a single−purpose credit card? A. Shell Oil B. Wells Fargo Visa C. Target D. Toys R Us E. Macy's
B. Wells Fargo Visa
The CARD Act of 2009 toned down the actions of credit card issuers by A. banning credit card issuers from locating themselves "near campus" (defined as within 50 feet). B. banning offers of freebies such as free pizza and T−shirts. C. banning the issuance of credit cards to persons under 18, unless the borrower can show proof that he or she can repay the credit card loans independently. D. banning the issuance of credit cards to persons under 18, unless someone over 25 co−signs on the account.
B. banning offers of freebies such as free pizza and T−shirts.
A low FICO score A. is a good credit score. B. can cost you quite a bit when you get a mortgage loan. C. may result in a credit card rate half the rate of that paid by those with a high FICO score. D. is the only factor the lender considers when determining whether to give you credit.
B. can cost you quite a bit when you get a mortgage loan
Financial institutions that provide traditional checking and savings accounts are commonly referred to as A. nondeposit−type financial institutions. B. deposit−type financial institutions. C. financial brokerage companies. D. personal depository institutions. E. None of the above are correct.
B. deposit−type financial institutions.
The ________ mortgage sets the payments in advance in such a way that they rise steadily for 5 to 10 years, then level off to allow a person to buy a home earlier in life. A. growing equity B. graduated payment C. balloon payment D. shared appreciation E. conventional
B. graduated payment
The Truth in Savings Act of 1993 A. requires that all institutions publish only annually compounded APRs. B. helps investors compare interest rates on investment options. C. ensures that all investments are federally insured. D. All of the above are correct.
B. helps investors compare interest rates on investment options.
All of the following are advantages of MMDA's except A. check−writing privileges. B. rates below alternatives. C. federally insured. D. earns interest.
B. rates below alternatives.
The ________ is the automatic repayment plan with a 10−year term. A. income−based repayment B. standard repayment C. extended repayment D. graduated repayment
B. standard repayment
Another name for a closed−end lease is a(n) A. take−out lease. B. walk−away lease. C. terminal lease. D. end−purchase lease. E. none of the above.
B. walk−away lease.
When borrowing for college, one thing to keep in mind is that you're not just paying for one year of school. About half of all colleges practice what is called "front loading of grants," which means that A. your grants will progressively increase as your graduation date approaches. B. your grants as a freshman will be more generous than your grants as a sophomore, junior, or senior. C. the more your parents or guardians pay upfront for your college expenses, the less grants you will receive. D. grants awarded in the fall will be worth more than grants awarded in the spring semester.
B. your grants as a freshman will be more generous than your grants as a sophomore, junior, or senior.
If you own a home with a market value of $175,000 and you have an outstanding balance on your mortgage of $60,000, your home equity is A. $57,500. B. $115,000. C. $235,000. D. $97,750.
B. $115,000.
Credit card insurance is usually unnecessary since your liability on credit card losses is limited by law to A. $ 0. B. $50. C. $100. D. $500.
B. $50.
Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day−to−day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. After balancing his checking account, what will his current balance be today? A. $9,500 B. $7,150 C. $7,550 D. $3,550 E. $3,950
B. $7,150
The two most common types of two−step mortgages are the A. 1/29 and 3/27. B. 5/25 and 7/23. C. 8/22 and 12/18. D. 13/17 and 15/15.
B. 5/25 and 7/23.
Candice is purchasing a new Jeep. She has the price negotiated down to what she thought was the lowest possible price until she heard that her Jeep has a holdback amount of 3%. Is it fair for Candice to ask the dealership to take the holdback amount off her final sales price? A. No. The dealership would most likely lose money on the sale. B. Absolutely, this would decrease the mark up price of the Jeep and save Candice additional dollars.
B. Absolutely, this would decrease the mark up price of the Jeep and save Candice additional dollars.
A check drafted on the financial institution's account is a(n) A. certified check. B. cashier's check. C. bank check. D. traveler's check.
B. cashier's check.
The ________ is the percentage of the credit card sale that the retailer owes to the credit card company. A. retailer credit acceptance fee B. merchant's discount fee C. card usage allowance D. franchise fee
B. merchant's discount fee
The ________ is the true simple interest rate paid over the life of a loan and provides a reasonable approximation for the true cost of borrowing. A. APP B. ADR C. APR D. ARR E. none of the above
C. APR
Comprehensive financial services packages that offer checking accounts, debit and credit cards, loans and brokerage services are known as? A. Credit Unions B. MMMFs C. Asset management accounts D. MMDA's
C. Asset management accounts
The ________ provides a single location for financial protection and oversight−and its mandate is to help consumers make better decisions. A. Center For the People Bureau (CFPB) B. Consortium of Fiscal Protection Bureau (CFPB) C. Consumer Financial Protection Bureau (CFPB) D. Consumer Fiscal Protocol Bureau (CFPB)
C. Consumer Financial Protection Bureau (CFPB)
Nico likes to go shopping. Every time he goes to a new store, he fills out an application for a store credit card so that he can get a 20 percent discount on his purchases that day. Yesterday, when he was trying to buy a new car, the dealer turned down his credit request. Nico can't understand why, because he thought he had good credit. If you looked at his credit report, what is the most likely reason he was denied credit? A. He has only worked for his current employer for nine months. B. Nine years ago, a lender referred his debt to a collection agency. C. He has too many recent inquiries on his credit report. D. There is not enough information available to answer this question.
C. He has too many recent inquiries on his credit report.
Over the past decade, the number of new car sales are down and the number of new car leases are up. What is probably the main reason why this is true? A. The salesman makes a higher commission when cars are leased. B. The manufacturers prefer it when people lease instead of purchase. C. New cars are getting so expensive that the average person can't afford to buy them. D. Both A and B are correct.
C. New cars are getting so expensive that the average person can't afford to buy them.
Alice has fallen behind on her signature loan. She recently received a notice from the lender that her wages were going to be garnished to pay off the debt. What is the loan clause that allows the lender to take this action against Alice because she was in default? A. Recovery clause B. Deficiency payments clause C. Recourse clause D. Default clause E. None of the above
C. Recourse clause
Select the one cost that is not involved in home ownership. A. Loan origination fee B. Closing/settlement costs C. Rental deposit D. Down payment E. Points/discount points
C. Rental deposit
Research has determined that undergraduate college students tend to behave in similar manners with regards to their credit card usage. As noted in Chapter 6, which of the following behaviors are indicative of undergraduate students' credit card behaviors? A. They make more than the required minimum payment on 90% of all other cards each month. B. They pay off all of their cards in full each month. C. They make more than their minimum payment each month but still tend to carry a balance on their cards. D. Their parents do not frequently pay their credit card balances for them.
C. They make more than their minimum payment each month but still tend to carry a balance on their cards.
What are short−term notes of debt issued by the federal government commonly called? A. T−Accounts B. T−Notes C. T−Bills D. T−Bonds
C. T−Bills
Which of the following is not a common fee arrangement for checking accounts? A. Minimum balance requirement B. Balance−dependent scaled fees C. Variable interest rates to reflect fee activity D. Monthly fee E. Charge per check
C. Variable interest rates to reflect fee activity
With a(n) ________ mortgage, you make relatively small monthly payments for several years, after which the loan comes due and you must pay it off in one large payment. A. interest only B. option payment ARM C. balloon payment D. growing equity
C. balloon payment
You are in the process of purchasing a new home. Expenses that the buyer and seller incur when finalizing the transfer of the ownership of the house are called A. transfer fees. B. finalization costs. C. closing costs. D. end costs. E. none of the above.
C. closing costs.
A(n) ________ loan calls for the repayment of both the interest and the principal at regular intervals and is commonly referred to as loan amortization. A. term B. simple interest C. installment D. personal E. none of the above
C. installment
If you are a convenience user an important factor in choosing a credit card should be A. credit limit. B. APR. C. interest −free grace period. D. issuing bank's location.
C. interest −free grace period.
A ________ is a middleman who, for a fee, secures mortgage loans for borrowers, but does not actually make those mortgage loans. A. mortgagor B. mortgage banker C. mortgage broker D. mortgagee E. none of the above
C. mortgage broker
One of the unpleasant secrets about using your credit card for a cash advance is that A. there is usually a 6 to 8 percent upfront fee on the amount. B. the APR on the cash advance is typically lower than the APR for normal purchases. C. payments do not apply to cash advance balances unless the balance for regular credit purchases is zero. D. All but B apply to cash advances.
C. payments do not apply to cash advance balances unless the balance for regular credit purchases is zero.
Variable−rate loans A. always adjust every month. B. are never a better option than fixed−rate loans. C. usually have rate caps that prevent them from varying too much. D. all of the above.
C. usually have rate caps that prevent them from varying too much.
When you withdraw cash from an ATM using your credit card A. the interest fee is lower than that for purchases. B. you are not charged any interest until after the date the payment is due. C. you begin paying interest immediately. D. you're using a relatively inexpensive way to borrow money.
C. you begin paying interest immediately.
Your credit card company cannot increase your rate for the first 12 months after you open an account unless A. you are more than 15 days late in paying your bill. B. your card has a fixed interest rate tied to an index and the index goes down. C. your card's introductory rate expires and your rate reverts to the "go−to" rate the company disclosed when you got the card. D. all of the above.
C. your card's introductory rate expires and your rate reverts to the "go−to" rate the company disclosed when you got the card.
The use of credit involves receiving cash, goods, or services with an obligation to pay later. Which statement is not an opening line to the use of credit in a shopper's language? A. "Charge it." B. "I'll pay for it with plastic." C. "Put it on my debit." D. "Put it on my account."
C. "Put it on my debit."
In general, the maximum ratio the lender would like to see on a PITI to Monthly Gross Income is? A. 25% B. 30% C. 28% D. 33%
C. 28%
Suppose that you go to a bank at which you have no account, give the bank cash, and in return obtain a check drawn against that bank which you will use to pay someone else. This is called a A. certified check. B. traveler's check. C. cashier's check. D. None of the above are correct.
C. cashier's check.
According to a Nellie Mae study, ________ of graduate students would have liked more information on financial management topics before they started school and would like financial management education made available to them now. A. 33 percent B. 53 percent C. 73 percent D. 93 percent
D. 93 percent
Which of the following is an advantage of online and mobile banking? A. Minimal start−up time to establish access B. Only operational during business hours C. The potential for subpar customer service D. Accessibility to and management of your accounts
D. Accessibility to and management of your accounts
In evaluating your financial history, lenders generally focus on which of the following? A. Your FICO score B. Your income C. Your credit report D. All of the above
D. All of the above
Sandra Smith wants to know the purpose of a title search. What would you tell her? A. To gain a clear title to the property B. To protect you against challenges to the title C. To make sure the person selling the property really owns it D. All of the above
D. All of the above
Which should you consider when house hunting? A. The school district B. The selling price C. The neighborhood D. All of the above
D. All of the above
How do you compare cash management alternatives to determine which is best for you? A. Take into account their tax status. B. Consider their safety or risk. C. Compare returns using comparable interest rates. D. All of the above are correct.
D. All of the above are correct.
Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Most likely, Jerome is A. not getting the benefits of a grace period. B. unaware of how much of his payments go toward interest. C. obligating his future income. D. All of the above are correct.
D. All of the above are correct.
Which of the following characteristics apply to liquid assets? A. They involve low risk. B. They are characterized by low returns. C. The temptation to spend is greater. D. All of the above are correct.
D. All of the above are correct.
The Fair and Accurate Credit Transactions Act (FACT) allows everyone to a free copy of their credit report every year. Why is it a good idea to check your credit report every year? A. To make sure that there are no errors on it B. To challenge any unauthorized entries C. To make sure that someone has not stolen your identity D. All of the above are good reasons.
D. All of the above are good reasons.
Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day−to−day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. What recommendations would you give Christopher concerning his cash management? A. Automate a savings plan using EFT. B. Create a budget and set some savings goals. C. Set up an account at a mutual fund company. D. All of the above are good recommendations. E. All of the above except C are good recommendations.
D. All of the above are good recommendations.
The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover short−term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. What financial principle do they need to understand better? A. The time value of money B. Risk and return go hand in hand. C. Taxes affect personal finance decisions. D. All of the above are important to their situation.
D. All of the above are important to their situation.
Your friends just told you that they were denied a mortgage by their bank. The loan officer told them that they did not pass the 36 percent rule. They are confused and want you to explain what happened? A. You need to come up with a larger down payment. B. You pay too much in other debt payments every month. C. The house you were looking at was more expensive than you can comfortably afford. D. All of the above could be correct. E. None of the above could be correct.
D. All of the above could be correct.
Christopher just received his checking account statement from his bank. He has a NOW account with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance. His statement shows that he currently has a balance of $3,950. In looking at his statement he notices that his car payment check for $400 is still outstanding, and that his recently received payroll deposit of $3,600 had not posted at the time the statement was created. His normal living expenses average $1,500 per month including his car payment. Other than his car loan, he rarely writes any checks as he prefers to use his debit card and ATM card for day−to−day living expenses. He pays his credit card balance in full every month. Other than his checking account he does not own any investments. He has always dreamed of owning a house, and would like to buy one within the next five years. He has access to a 401(k) pension plan at work where his employer will match contributions up to 6% of his salary. He currently contributes 2% of his salary to this plan. What would you recommend to Christopher concerning his cash management? A. He should switch his current account to a Money Market Deposit Account. B. He should set up EFT payments for his auto loan. C. He should give up some liquidity. D. All the above are correct. E. All but C are correct.
D. All the above are correct.
The Truth In Lending Act requires that all consumer credit agreements disclose the ________ in bold print? A. Monthly Stated Rate (MSR) B. Effective Annual Rate (EAR) C. Nominal Interest Rate (NIR) D. Annual Percentage Rate (APR)
D. Annual Percentage Rate (APR)
Many banks offer free checking accounts. What may be the opportunity costs associated with free checking? A. High minimum balance requirements B. Overdraft protection C. Low interest rates D. Both A and C are correct answers.
D. Both A and C are correct answers.
What is your potential liability from the deficiency payments clause if you default? A. Nothing, since the loan is in default it invalidates all loan clauses. B. You will have to pay any legal or repossession fees incurred by the lender. C. You will have to pay the remainder of the loan balance if the proceeds from the repossession are not sufficient to pay off the loan. D. Both B and C are correct.
D. Both B and C are correct.
Brenda White had her bank certify one of her personal checks as being good. Which type of check has been issued? A. Cashier's check B. Traveler's check C. Audited check D. Certified check E. Money order
D. Certified check
________ is a publication that provides unbiased ratings and recommendations for a host of products and services. A. Bloomberg Weekly B. USA Consumer C. People Magazine D. Consumer Reports
D. Consumer Reports
Which of the following is not a liquid asset? A. CDs B. Money market funds C. Checking accounts D. Credit cards
D. Credit cards
Susan has always maintained an excellent credit rating over the years. She has an annual income of $63,000, has lived at her current residence thirteen years, and has worked at the same job for eight years. Susan works in a clerical position, has two credit cards and maintains two bank accounts. Susan is very conservative and has all of her savings ($12,000) in a NOW account at her local bank. One of her credit cards has a balance of $550 and has an APR of 23%. Susan has been making monthly minimum payments on the credit card. Out of curiosity she would like to know how her credit card companies judge her creditworthiness and what she can do to improve her financial situation. Susan has never seen a copy of her credit report. Which of the following is not a credit bureau? A. Equifax B. TransUnion C. Experian D. Equitax
D. Equitax
Which of the following is not an advantage of living in a condo? A. Building equity for resale and investment B. Direct ownership of a specific unit C. Limited maintenance D. Freedom from neighbors
D. Freedom from neighbors
A Money magazine survey revels that couples have arguments over money mostly over? A. Credit Card Debt B. Insufficient Savings C. Household Budgets D. Frivolous Purchases
D. Frivolous Purchases
Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant? A. A rental unit B. A co−op C. A condo D. Home ownership
D. Home ownership
According to the Keown book, how does a consumer avoid predatory lending? A. Steering B. Legal action C. Regulation D. Knowledge
D. Knowledge
When do the payments on a Stafford Loan begin? A. You can choose when your payments begin anytime within 24 months of your graduation date. B. When your school receives the money from the government C. When your loan balance gets over $5,000 D. None of the above is correct.
D. None of the above is correct.
What is the name of the interest rate banks charge to their most creditworthy customers? A. Blue chip rate B. Premier rate C. Main rate D. Prime rate E. None of the above
D. Prime rate
You have an option on an ARM that has a two−year adjustment interval, 4% margin, 2% periodic rate cap and a 6% lifetime cap. The current initial rate is 5.35%. You can also get a 30−year, fixed−rate mortgage for 6.65%. You plan on staying in this home for at least 10 years. What would be your best choice? A. Probably the ARM loan since your PITI would be lower. B. Probably the ARM loan since your PITI would be lower and the market rates of interest could get lower. C. Probably the fixed−rate loan because your PITI will be lower. D. Probably the fixed−rate loan because it is easier to budget for and it is less risky for you.
D. Probably the fixed−rate loan because it is easier to budget for and it is less risky for you.
Susan has always maintained an excellent credit rating over the years. She has an annual income of $63,000, has lived at her current residence thirteen years, and has worked at the same job for eight years. Susan works in a clerical position, has two credit cards and maintains two bank accounts. Susan is very conservative and has all of her savings ($12,000) in a NOW account at her local bank. One of her credit cards has a balance of $550 and has an APR of 23%. Susan has been making monthly minimum payments on the credit card. Out of curiosity she would like to know how her credit card companies judge her creditworthiness and what she can do to improve her financial situation. What should Susan do in regards to her credit card balance? A. She should continue to make minimum monthly payments. B. She should take out a small loan to pay off the credit card. C. She should pay half of the balance this month and the remaining balance next month. D. She should use some of her savings to pay off the balance in full immediately.
D. She should use some of her savings to pay off the balance in full immediately.
NOW accounts offer an option to traditional demand deposits. All of the following are characteristics of NOW accounts except one. Which is it? A. There is a monthly fee associated with them. B. You must generally maintain high minimum balances. C. The interest rate is generally lower than other cash management alternatives. D. The interest rate is generally higher than other savings accounts.
D. The interest rate is generally higher than other savings accounts.
Which of these is not an advantage associated with an assumable loan? A. The new buyer does not incur the closing costs of a new loan. B. The new buyer may be able to get a lower interest rate than the current market rate. C. It is easier for the seller to sell the home. D. The new buyer does not have to qualify for the loan.
D. The new buyer does not have to qualify for the loan.
Sometimes retailers will give you up to a 5% discount if you pay cash for their products instead of using your credit card. Why? A. They are getting close to their monthly charge limit and don't want to go over it. B. Its much less paper work to process cash transactions. C. It is just good customer service, especially for repeat customers. D. They are saving on the merchants discount fee so they pass the savings on to you.
D. They are saving on the merchants discount fee so they pass the savings on to you.
Which of the following is NOT a credit bureau? A. Equifax B. Experian C. TransUnion D. VantageScore
D. VantageScore
When college students start saving early A. in an account earning interest, they immediately put their money to work. B. they can take advantage of the time value of money and achieve their financial goals. C. by automating their savings, they are less likely to spend money. D. all of the above.
D. all of the above.
An example of a consumer loan is a(n) A. interim loan. B. pre−payment loan. C. unsecured loan. D. both A and C.
D. both A and C.
A Credit Bureau A. makes decisions about issuing credit. B. contains information on your personal lifestyle. C. does not assign a score. D. contains information regarding your financial situation and dealings.
D. contains information regarding your financial situation and dealings.
Jerome has three major credit cards and makes payments on them each month. He has had one of them for six years, another for three years, and the last for eleven months. Making just the minimum payment has become automatic at this point, and Jerome barely even looks at the statements. Jerome is beginning to think that his approach to credit may be faulty, and he wants to find out how to adjust it. He just applied for two additional credit cards. Jerome would be considered a A. T&E card user. B. convenience user. C. combination credit and convenience user. D. credit user.
D. credit user.
For the convenience credit card user the interest rate is A. irregular. B. intimidating. C. irresistible. D. irrelevant.
D. irrelevant.
An Affinity card A. has the ability to be "liked" on social media. B. is the card you use the most. C. is issued by Affinity Bank and Trust. D. is issued in conjunction with specific organization or charity.
D. is issued in conjunction with specific organization or charity.
A situation in which the monthly payments are less than the interest that is due on the loan, and the unpaid interest is thus added to the principal is called A. decaying amortization. B. reverse amortization. C. partial amortization. D. negative amortization. E. none of the above.
D. negative amortization.
Pay yourself first refers to A. buy the house you've always dreamed of. B. buy that car you've been wanting. C. head out on a exotic vacation. D. put money in a savings account.
D. put money in a savings account.
Credit cards are a form of ________ credit. A. installment B. service C. close ended D. revolving
D. revolving
Which of the following statements would most correctly complete the following sentence? As the interest rate on a loan increases A. the payment amount would decrease (other things held constant). B. the amortization would increase (other things held constant). C. the loan maturity would decrease (other things held constant). D. the payment amount would increase (other things held constant). E. none of the above.
D. the payment amount would increase (other things held constant).
You are considering the purchase of an acre of land out in the country to build your future house on. You pay for an investigation of the public record to determine the current legal owner of the property. This is called a(n) A. appraisal search. B. escrow search. C. legal entity search. D. title search. E. none of the above.
D. title search.
One of the following lists constitutes the five Cs of credit. Select the correct one. A. Character, capacity, capital, collateral, co−insurance B. Character, capacity, capital, collateral, credence C. Character, capacity, capital, collateral, characteristics D. Character, capacity, capital, collateral, conditions E. Character, capacity, capital, collateral, careful
D. Character, capacity, capital, collateral, conditions
Suppose that you were thinking about leasing a new vehicle. Which of the following should not be an important consideration? A. I dislike the hassle of trading−in or selling cars. B. I drive less than 15,000 miles annually. C. I dislike the hassle of maintenance. D. It's the only way I can afford the vehicle that I want. E. I like to get a new car every few years.
D. It's the only way I can afford the vehicle that I want.
Many lenders use the 28/36 rule in evaluating mortgage applications. If your mortgage payment itself is 28% of your gross income, that means that the remainder of your monthly debt must be ________% or less. A. 7 B. 36 C. 6 D. 28 E. 8
E. 8
Which of the following is the best strategy for controlling and managing your credit cards and open debt? A. Look for trouble signs in credit card spending. B. Protect against fraud. C. Reduce your balance. D. Resolve billing errors. E. All are good strategies.
E. All are good strategies.
Wally currently has a balance of $14,500 on his credit cards and he is having a hard time making the minimum payments on them. He has missed several payments and is now paying the default APR of 29.99%. He and his wife own a nice home with $40,000 in equity. They have $7,500 in a certificate of deposit with a 4% APR. He has come to you in tears asking for advice. What would you tell him to do? A. Seek out a non−profit credit counseling company. B. Take out an equity loan on the house. C. Become a convenience user, and maintain just one credit card. D. Cash out his CD and pay down his credit cards. E. All of the above
E. All of the above
What strategy should you use to obtain the lowest possible APR on a loan? A. Keep the term (length) of the loan as short as possible. B. Make a large down payment. C. Get a variable−rate loan. D. Provide collateral. E. All of the above
E. All of the above
Which of the following characterize secured loans? A. They are typically easier to get. B. They are backed with either physical or investment assets. C. They reduce the lender's risk. D. Interest rates tend to be lower than unsecured loans. E. All of the above
E. All of the above
What rights would a college friend of yours have whose credit card application was denied? A. The right to have the file be accurate B. The right to point out errors in her file C. The right to request mistakes in the file be corrected D. The right to view her credit report E. All of the above are correct answers.
E. All of the above are correct answers.
Your credit score affects A. your mortgage rate. B. the amount of junk mail offering additional credit cards that you receive. C. the rate you pay on your credit cards. D. the size of your credit line. E. All of the above are correct answers.
E. All of the above are correct answers.
Liquid assets or funds are important to A. prevent overdrafts in checking accounts. B. prevent interrupting your long−term investments. C. cover some planned expenses. D. cover unplanned expenses. E. All of the above are correct.
E. All of the above are correct.
Money−market mutual funds (MMMFs) provide an alternative to traditional liquid investments offered by financial institutions. What are/is the advantage(s) of an MMMF? A. Convenience—deposits made through payroll deductions B. High interest rates C. Minimal risk D. Check−writing privileges E. All of the above are correct.
E. All of the above are correct.
What can a couple seeking to get out of debt do? A. Seek help from a reputable credit counselor. B. Avoid future use of credit card debt, except on a emergency basis. C. Use savings to pay off current debt. D. See if their creditors will restructure their loans. E. All of the above are correct.
E. All of the above are correct.
When using an ATM, keep in mind that A. it is never safe to deposit cash in an ATM. B. you should report electronic transaction mistakes to the bank immediately. C. computer errors can occur. D. human problems in handling the transactions can occur. E. All of the above are correct.
E. All of the above are correct.
Which of the following is not required by law to be on a loan disclosure statement? A. The total amount financed B. All finance charges C. The total amount of payments D. Annual percentage rate E. All of the above are required.
E. All of the above are required.
One of the five C's of credit is capacity. Most likely, what information would potential creditors consider in evaluating your capacity? A. Your marital status B. Your age C. Your liquidity ratios D. Your leverage ratios E. Both C and D are correct answers.
E. Both C and D are correct answers.
Which of the five Cs of credit would your actual home be in relation to your mortgage? A. Character B. Capacity C. Capital D. Conditions E. Collateral
E. Collateral
Which of the following regarding credit application analysis is incorrect? A. Bankruptcy remains a mark against you for a period of ten years after it occurs. B. You are entitled to one free copy of your credit report each year from the three major credit bureaus. C. Credit card issuers normally assign a minimal acceptable credit cutoff score. D. Lenders may not discriminate on the basis of age. E. None of the above statements is incorrect; all of the above are true statements.
E. None of the above statements is incorrect; all of the above are true statements.
What is the name of the formal document that outlines the legal obligations of both the lender and the borrower? A. Claim B. Tort C. Debenture D. Default E. Note
E. Note
Bob and Marilyn Hartin know the bank will carefully evaluate their situation before lending them the money for the mortgage for their new home. Which is not a consideration? A. Their level of debt B. Their ability to pay C. Appraised home value D. Their financial history E. The number of children they have
E. The number of children they have
What will the courts do if you file Chapter 7 personal bankruptcy? A. Eliminate most of your debts. B. Liquidate most of your assets to pay off creditors. C. Allow you a chance to start again financially. D. Confiscate most of your assets. E. all of the above
E. all of the above
When following smart buying to purchase a home you should A. determine how much of a down payment you can afford. B. look at your overall financial plan to determine how big a loan you should take on. C. create a budget and determine what PITI you can afford. D. check out your FICO score and get a copy of your credit report. E. all of the above.
E. all of the above.
An advantage that direct or subsidized student loans have over other types of loans is A. you can borrow at a below−market rate, regardless of your credit situation. B. the after−tax interest rates are very attractive compared with other loans. C. in an emergency, you can declare bankruptcy and avoid repayment. D. you have the rest of your life to pay it back. E. both A and B are correct.
E. both A and B are correct.
The major differences between a premium prestige card and a regular credit card include A. higher interest rates. B. higher credit limits. C. additional perks and benefits. D. both A and B above E. both B and C above
E. both B and C above
Typically, the credit card issuer allows you a grace period, which means A. interest charges are reduced during this time. B. you are not charged any interest during this grace period. C. you must pay your balance off in full to benefit from the grace period. D. you do not have to make a payment during the current month. E. both B and C apply.
E. both B and C apply.
The advantages of a fixed−rate mortgage over an ARM include A. no private mortgage insurance required. B. fixed payments that are easier to budget for. C. less worry about the loan reaching the rate and payment caps. D. none of the above. E. both B and C.
E. both B and C.
A simple interest installment loan calculates interest on the unpaid balance. An add−on A. calculates the same way with the addition of a factor. B. is more costly. C. is less costly. D. calculates interest on the original balance. E. both B and D.
E. both B and D.
The loan contract is a formal document called a(n) ________ and may contain a(n) ________ specifying who retains control over the item being purchased in the case of default. A. note; legal transaction B. agreement; indenture C. indenture; security agreement D. agreement; insurance clause E. note; security agreement
E. note; security agreement
A balloon loan calls for repayment of both interest and principal at regular intervals, with the payment levels set so that the loan expires at a preset date. (T/F)
False
A money order is typically less liquid than a personal check. (T/F)
False
A mortgage with a 20% down payment will have a higher APR than one with less than 20% down. (T/F)
False
A subprime mortgage is a mortgage with an APR below the prime rate. (T/F)
False
According to the Bankcard Holders Association of America, about 95 percent of all bank card issuers use the adjusted balance method. (T/F)
False
According to Edmunds.com, a new car's value declines by 15 to 19 percent in the first minute of ownership after you leave the lot. (T/F)
False
An acceleration clause states that if you default on a secured loan, not only can the lender repossess whatever is secured, but if the sale of the asset does not cover what you owe, you can also be billed for the difference. (T/F)
False
An appraisal is a typical but not required part of the mortgage approval process. (T/F)
False
An assessment is a voluntary contribution by the condominium owners. (T/F)
False
A traveler's check is a personal check that has been certified as being good by the financial institution on which it is drawn. (T/F)
False
Brick−and−mortar banks typically offer superior interest rates for borrowers and savers. (T/F)
False
Changes to credit card policies and rates are usually announced via "bill addendums," which are notices enclosed with your bill. (T/F)
False
Credit card issuers are free to set up shop near large university campuses and offer free gifts−anything from free or discounted flights to free Frisbees. (T/F)
False
Credit purchases made for personal needs like home mortgages or car loans are referred to as revolving credit. (T/F)
False
For most cars, the manufacturer's warranty extends through the first seven years of ownership or the first 70,000 miles, whichever comes first. (T/F)
False
If you are the type of person who wants complete control over the style and decoration of your home, then a condominium or cooperative would be an appropriate housing decision for you. (T/F)
False
It is against the law for your potential employer to use your credit score for employment considerations. (T/F)
False
Loans using the add−on method are a relative bargain, and should be sought out. (T/F)
False
Most credit users are more interested in free benefits than low APRs. (T/F)
False
Most predatory lenders offer prepayment privileges with their mortgages. (T/F)
False
One of the unpleasant secrets of using your credit card for a cash advance is that the APR on the cash advance is typically lower than the APR for normal purchases. (T/F)
False
PITI is a one−time, initial cost of home ownership. (T/F)
False
People with high credit card balances still need to invest money on a regular basis. (T/F)
False
Smart buying means buying what you want first and figuring out how you'll pay for it later. (T/F)
False
Someone who plans on selling his or her home within the next 3 years should get a fixed−rate mortgage. (T/F)
False
Student loans are a smart source of financing for school because you only pay part of the interest charges and the rest is subsidized by the lender. (T/F)
False
Student who are awarded grants must pay back a percentage of the amount after graduation. (T/F)
False
Tenants are guaranteed to get their full deposit back no matter the condition of the unit upon moving out. (T/F)
False
The APY is the APR after taxes. (T/F)
False
The majority of people never live in rental housing. (T/F)
False
The rate cap on an ARM sets a dollar limit on how much your monthly payment can increase during any adjustment period. (T/F)
False
The two most common types of two−step mortgages are the 8/22 and 12/18, in which lenders offer a lower interest rate for the first 8 or 12 years and then adjust the rate for the remaining 22 or 18 years. (T/F)
False
There is no cash advance fee when you use your credit card at an ATM machine. (T/F)
False
Under a Stafford Loan, parents borrow money for their child's education. (T/F)
False
Unsecured loans are generally less risky to lenders than secured loans. Therefore secured loans typically charge a higher APR than unsecured loans. (T/F)
False
Using your credit cards for cash advances is a relatively cheap way to borrow money because you usually do not start paying interest until the next billing period. (T/F)
False
Variable−rate loans tied to long−term rates expose you to more risk of rate changes than variable−rate loans tied to short−term rates. (T/F)
False
When making a smart purchase you don't need to consider such charges as delivery fees, installation fees or service costs as these are already included in the purchase price. (T/F)
False
You can only get an ARM loan from a predatory lender. (T/F)
False
It's advisable to always take the biggest loan that a lender will give you. (T/F)
False
A 529 plan is a tax−advantaged savings plan designed to encourage parents to save for future college costs for their children. The plan comes in two forms: pre−paid tuition plans and college savings plans. (T/F)
True
A condominium is a good choice of housing for someone seeking an affordable, low−maintenance situation with some shared amenities. (T/F)
True
A convenience user doesn't really care what the APY is on their credit cards. (T/F)
True
A credit bureau is a private organization that maintains credit information on individuals, which it allows subscribers to access for a fee. (T/F)
True
A debit card is something of a cross between a credit card and a checking account. (T/F)
True
A mortgage broker earns income based on fees or commissions on the loans they broker. (T/F)
True
A secured credit card is a good tool to help establish credit. (T/F)
True
A title search fee is paid to an attorney or title company for searching ownership records to make sure the person selling you the property really owns it. (T/F)
True
According to a Nellie Mae study, 93 percent of graduate students would have liked more information on financial management topics before they started school and would like financial management education made available to them now. (T/F)
True
An appraisal is an estimate of what your home and property are worth. (T/F)
True
An assumable loan is one that can be transferred to a new buyer who simply takes over the loan obligations. (T/F)
True
An automobile warranty provides coverage for the basic parts against manufacturer's defects for a set period of time or miles. (T/F)
True
Buying a home generally isn't desirable if you don't intend to stay in it for more than two or three years. (T/F)
True
Card−blocking occurs when you use a debit card (or credit card) to check into a hotel or rent a car and the anticipated expenses are blocked−in effect, placing a hold on the money. (T/F)
True
Consumer loans can range from unsecured, fixed−rate, single−payment loans to secured, variable−rate, installment loans. (T/F)
True
Crystal tried to use her Macy's credit card at Target but was unsuccessful because her Macy's credit card is a single−purpose card and can only be used at Macy's. (T/F)
True
Due to compounding frequency, the actual interest rate or APY you pay is higher than the advertised interest rate or APR. (T/F)
True
For a consumer who does not have a checking account a prepaid debit card is a means of paying for goods and services. (T/F)
True
For many consumers, a good school district is an important consideration when purchasing a home. (T/F)
True
If you have just been transferred to a new city and plan to live in your new location for many years, buying a house is generally a better option than leasing for the first year. (T/F)
True
Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral. (T/F)
True
Liquid assets allow you to cover unplanned expenses without having to interrupt your long−term investments or liquidate any tangible assets. (T/F)
True
Mortgage bankers originate mortgage loans, sell them to banks, pension funds, and insurance companies, and service or collect all the monthly mortgage payments. (T/F)
True
Most home owners have complete autonomy to remodel their dwelling to suit their own needs and tastes. (T/F)
True
Nondeposit−type financial institutions are commonly referred to as mutual funds and brokerage firms. (T/F)
True
One way to think of liquid assets is as a reservoir, with money moving in as wages are received and moving out as living expenses are paid. (T/F)
True
Online banking simplifies cash management and budgeting for consumers. (T/F)
True
Payday loans are a dangerous way to borrow money, and charge an annual interest rate of almost 400%. (T/F)
True
Special assessments are fees that can be charged to cooperative shareholders and condominium owners to cover large maintenance and repair items. (T/F)
True
Stretching a car loan from 48 months to 60 months means the car will end up resulting in a smaller monthly payment. (T/F)
True
The APR is larger when money is lent under the discount method than when it is lent under the simple interest method. (T/F)
True
The first step at the car dealership is to negotiate the best price that you can on the car that you need. (T/F)
True
The interest rate earned on a money market deposit account is generally higher than the interest earned on a Bank savings account. (T/F)
True
The interest that you pay on your student loans will lower your taxable income if you meet IRS guidelines. (T/F)
True
The monthly payments on a 36−month lease on a car will often be smaller than the monthly payments on a 36−month loan to purchase the car. (T/F)
True
The rate cap on an ARM protects the borrower. (T/F)
True
The safest place to get a mortgage is at your bank, credit union, or savings and loan institution. (T/F)
True
The typical down payment is 20% for traditional mortgage loans. (T/F)
True
Virginia Tech's Hokie Passport is an example of a smart card. (T/F)
True
When comparing returns on cash management investment alternatives, it is important to make sure that the rates you compare are all on the same tax basis. (T/F)
True
When you automate your savings you are less likely to spend those dollars because they never become part of the funds in your checking account. (T/F)
True
With a discount method single−payment loan, the entire interest charge is subtracted from the principal before you receive the money, and at maturity you repay the principal. (T/F)
True
Young, single people often live in rental housing, since they may not yet have the funds to purchase a home. (T/F)
True
