True and False Chapters 9-13
In general you will receive more favorable terms on a secured loan
True
Independent insurance agents
represent many different insurance comapnies
During the financial crisis of 08-09, approx. ___ % of subprime mortgages had late payments of at least 30 days A. 25 B. 75 C. 5 D. 50
A. 25
A 15- year mortgage compared to a 30- year mortgage has all of the following except A. A lower appraisal fee B. less interest over the life of the loan C. Higher payments D. faster build up of equity
A. A lower appraisal fee
Which of the following would probably not be required when applying for a personal loan? A. A personal resume B. A personal balance sheet C. A personal cash flow statement D. A loan application
A. A personal resume
Having a longer term loan... A. costs you more interest and therefore increases the cost of your loan B. makes your monthly payments larger C. is almost always the best alternative for credit users D. gives you access to additional sources of financing
A. Costs you more interest and therefore increases the cost of your loan.
The loan contract identifies all but which of the following A. Credit Score B. Amount of the loan C. Interest Rate D. Loan repayment schedule
A. Credit Score
In making the purchase versus leasing decision, it is important to remember that A. Dealers may impose an additonal mileage cost B. Leasing is less risky than a purchase C. leasing is less expensive that a purchase D. you wont be required to pay maintenance costs on the leased car
A. Dealers may impose an additional mileage cost
The loan contract identifies all of the following except A. Loan officer B. Maturity C. Loan repayment schedule D. collateral
A. Loan Officer
Personal preferences for a car include all of the following except A. Considering what kind of car you really want, regardless of what you need B. size of the car C. price of the car D. size of the engine and fuel economy
A. considering what kind of car you really want, regardless of what you need.
Collateral... A. gives the lender additional recourse if the payments are not made B. is used on unsecured loans. C. increases the interest rate on loans. D. is required on all loans
A. gives the lender additional recourse if the payments are not made
Common practices used by dishonest lenders include all of the following except the lender A. Prohibiting the borrower from purchasing insurance or other financial services as a condition of the loan B. charging high loan fees which cause financing costs to be much higher than the quoted rates C. Requiring that the borrower purchase insurance or other financial services D. having a large balloon payment will required additional financing to pay it off
A. prohibiting the bororwer from purchasing insurance or other financial services as a condition of the loan
Which of the following is true about condominium's? A. Each person owns a portion of the land on which a condominium is located B. Maintenance fees of common areas are shared C. they have more privacy than single family homes D. All the above
B Maintenance fees of common areas are shared.
The monthly payment for a 15- year loan would be about ___ times as much as a comparable 30-year loan A. 0.5 B. 1.25 C. 2.0 D. the same
B. 1.25
Insurance agents who work for one partcular company are called A. Company Agents B. Captive Agents C. Independent Agents D. Freelance Agents
B. Captive Agents
Which of the following is not usually used as collateral for a loan A. A boat B. Clothing C. Car D. House
B. Clothing
The first step in the home-buying process should be to A. identify the specific home you want to purchase B. determine a realistic price range of homes you can afford C. compare the cost of buying to renting D. find a good realtor
B. Determine a realistic price range of homes you can afford
Which of the following is the most common source of financing for personal loans? A. Family and Friends B. Financial Institutions C. Credit Cards D. Sales Finance Companies
B. Financial Institutions
Making extra payments on a loan does all except which of the following? A. Reduces the total amount of interest paid B. Gives you extra income for living expenses C. Reduces the maturity of the loan D. Helps assure your good credit rating
B. Gives you extra income for living expenses
what is the correct chronological order of the items listed below? A. Good credit history, Loan Contract, repayment schedule, Loan application B. Good Credit History, Loan Application, Loan Contract, Repayment Schedule C. Good credit history, repayment schedule, loan application, loan contract. D. Good credit history, repayment schedule, loan contract, loan application
B. Good Credit History, Loan Application, Loan Contract, Repayment Schedule
_____ is not a suggested risk management strategy A. Avoiding risk B. ignoring risks C. Accepting risks D. Insuring against risk
B. Ignoring risks
Each of the following provide personal loans EXCEPT A. Commercial banks B. Insurance Companies C. Finance Companies D. Credit Unions
B. Insurance Companies
When considering how much money to spend on the purchase of a new car, you must consider how your choices affect your spending on other needs. The ______ solution limits your purchases to what you can afford pay off when your credit card bill arrives each month A. Maximum Debt B. Limited Debt C. No Debt D. Minimum Debt
B. Limited Debt
The document that specifies the term of the loan as agreed to by the borrower and lender is called the A. Loan Repayment Schedule B. Loan Contract C. Loan Application D. Terms of agreement
B. Loan Contract
Personal loans include the following items except A. Car loans B. Mortgage Loans C. Student Loans D. Home equity loans
B. Mortgage Loans
When purchasing a home, which of the following costs will you not incur? A. Origination Fee B. Realtor's Commission C. Application Fee D. Appraisal Fee
B. Realtor's commission
Lessening your exposure to an illness by gettting periodic health checkuos is an example of A. avoiding risk B. reducing risk C. accepting risk D. transferring risk
B. Reducing Risk
Which kind of loan generally has the lowest interest rate charged A. Unsecured Loan B. Secured Loan C. Cash advance D. Vacation loan
B. Secured Loan
The personal loan process with a financial institution requires all of the following except
B. Sitting through an interview
the Truth-in-Lending Act (1969) requires which of the following A. Adherence to the interest rates established by the Federal Reserve B.Specifying a standard loan rate C. Disclosure of only interest charges but no other fee D. All of the above
B. Specifying a standard loan rate
When a mortgage lender provides loans to borrowers without sufficient income or a down payment, the lender is said to provide a _______ mortgage A. VA B. Subprime C. prime D. FHA
B. Subprime
All of the following are true regarding a cosigner on an account except A. the cosigner is responsible for any unpaid balance B. the lender may not seize assets of a cosigner C. cosigning an account is a big liability and should be taken seriously D. cosigning on a loan can restrict the amount that the cosigner is able to borrow
B. The lender may not seize assets of a cosigner
Which of the following items would a personal loan be a better option than a credit card for a college student? A. Car maintenance expense B. Tuition and dorm fees C. Trips home for the holidays D. Tickets to sporting events
B. Tuition and dorm fees
On a fixed rate mortgage, the monthly A. Payments remains constant; interest rate fluctuates B. Payment remains constant and interest rate stays the same C. rate varies and the interest rate varies D. payment remains constant until the balloon payment
B. payment remains constant and interest rate stays the same
An advantage of using online realtor services is that A. you have easier access to qualified realtors B. the commissions and fees are often less than those charged by traditional full-service realtors. C. your chances of selling a house are about 50% greater D. you will get a higher price for houses sold or pay lower prices for houses bought
B. the commissions and fees are often less than those charged by traditional full-service realtors
In a loan repayment schedule, the term amortized refers to A. the method by which interest is calculated B. the repayment of the principal through a series of equal payments C. the life of a loan D. assets used to back the loan
B. the repayment of the principal through a series of equal payments
Regarding the amount of money borrowed on a loan, all of the following are true except A. the amount is based on how much the lender believes you can pay back in the future B. you should borrow slightly more than you need to cover future inflation C. you should only borrow the amount you need. D. you will have to pay interest on the entire amount
B. you should borrow slightly more than you need to cover future inflation
Which of the following items must you provide when applying for a loan in order to prove you have a collateral to back your loan? A. Personal cash flow statement B. Paycheck stub C. Personal Balance Sheet D. Credit Card Statements
C) Personal Balance Sheet
On the purchase of a home, one "point" is equal to A. 100 B. 1,000 C. 1% of the amount being financed D. 1% of the purchase price
C. 1% of the amount being financed
Annual Property taxes for homes are usually A. less than 0.5% of the home value B. 0.5% to 1% of the home value C. 1%-2% of the home value D. greater than 2% of the home value
C. 1%-2% of the home value
Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is very low and the potential financial loss due to the event is small? A. Avoid Risk B. Reduce Risk C. Accept Risk D. Insure against risk
C. Accept Risk
Which of the following methods of caluclating interest is the most expensive A. APR B. Simple Interest C. Add-on interest D. sum of the digits
C. Add-on Interest
When buying a home, all of the following one should consider except A. consider condominium as an alternative to purchasing a home B. once you decide how much you can afford, identify a specific home you desire C. Borrow as much as the lender's willing to loan you since the mortgage interest is tax deductible and may result in a large tax refund D. evaluate the homes for sale in your target area
C. Borrow as much as the lender's willing to loan you since the mortgage interest is tax deductible and may result in a large tax refund
The _____ the maturity of a loan, the ________ the payments. A. longer; smaller B. shorter; larger C. Both A and B D shorter; smaller
C. Both A and B
If you always drive cars many miles and keep them for 10 years, it would be probably be best to A. Lease a new Car B. Lease a used Car C. Buy a new car D. Buy a used car
C. Buy a new car
The type of home which probably would require the lowest maintenance is a A. A large home B. Older Hole C. home built by a well-known construction company D. home with a large yard
C. Home built by a well-known construction company.
Over the life of a loan, the payment to principal ______ and the portion to interest expense_______ A. Increases; increases B. decreases; increases C. increases; decreases D. decreases; decreases
C. Increases; Decreases
The primary function of insurance is to A. to insure you against all types of risk B. Become wealthy from the claims you file C. maintain your existing level of wealth D. Give you peace of mind
C. Maintain your existing level of wealth
If you are considering trading in a used car on your new one, it is best to A. tell the dealer right away so he can figure your trade-in credit against the purchase of your new car B. not trade the car in, but rather sell it yourself to someone else C. make the trade-in deal a separate transaction for the new car deal D. not too be concerned about the value given, since dealers are required to give you at least blue book value
C. Make the trade-in deal a separate transaction for the new car deal.
When negotiating the price of any car, which of the following statements is true? A. the car dealer earns a small profit if the customer doesn't negotiate and pays full price B. Dealers that negotiate will purposely price cars below the price for which they are willing to sell the car C. Sales people are trained to act as if they are giving away the car D. The salesman is uncertain of the price at which he can sell you the car until you begin negotiation.
C. Sales people are trained to act as if they're giving the car away
If you agree to allow the lender to take your computer in the event you fail to make payments, the loan is which of the following? A. Amortized B. unsecured C. Secured D. Interest Free
C. Secured
Personal loans from family members or friends A. Are not good sources of financing B. Are more expensive than loans from other sources C. Should have a loan agreement in writing to avoid problems later on D. Are not desirable from the lender's point of view.
C. Should have a loan agreement in writing to avoid problems later on
In Which of the following scenarios would you favor leasing over purchasing a car? A. the miles that your drive each year varies significantly and is hard to predict B. Repair expenses are usually low for the car C. the car in question is one whose value depreciates rapidly. D. All of the above
C. The car in question is one whose value depreciates rapidly
What should you not consider when selecting a vehicle A. personal preferences B. Insurance costs C. all parts are American-made D. resale value
C. all parts are american-made
The size of the monthly payment on a loan is dependent on all of the following except A. principal borrowed B. interest rate C. your age D. maturity
C. your age
Personal loans include which of the following? A) Car loans B) Credit card advance payments C) Home equity loans D) Both A and C
D) both A & C
If you wish to keep your monthly payments as low and predictable as you can, you should use a A. 15-year ARM B. 30-year ARM C. 15 year fixed rate D. 30 year fixed rate
D. 30-year fixed rate
A personal loan is different from a credit card in all of the following except A. is normally used to finance one large B. has a specific repayment schedule C. Can be used only once D. contains a longer grace period
D. Contains a longer grace period
You could reduce the size of your monthly payments by A. agreeing to a higher interest rate B. borrowing the same amount of money but for a shorter period of time C. Borrowing more money initially for the same period of time D. Lengthening the maturity
D. Lengthening the maturity
If a homebuyer shops around, she/he can probably avoid which of the following fees? A) title search B) Title insurance C) Appraisal Fees D) Loan origination Fee
D. Loan origination fee
the method of determining the monthly interest amount by adding the interest and loan principal together and dividing by the number of payments is the A. simple-interest B. APR method C. simple-interest decling D. add-on interest method
D. add-on interest method
In an effort to stimulate the housing market, some financial institutions accepted a(n) _____ arrangement in which the proceeds of the sale of the home were less than the debt owed on the home A. mortgage modification B. Foreclosure C. Refinancing D. short-sale
D. short-sale
The most favorable car financing is that of A. commercial Banks B. credit unions C. Car dealers D. there is no best deal every time; it pays to shop around
D. there is no best deal every time; it pays to shop around
A point is a flat fee of $500 for each multiple of $100,000 that you finance on a new home
False
Buying a new car on line is just about as efficient as buying an airline ticket or a book
False
Collateral is defined as assets if the lender that back a secured loan in the event of a default
False
Even an unsecured personal loan should be backed by collateral
False
Homes near areas that have just been zoned for industrial use become more valuable
False
In comparing a 30- year and 50- uear mortgage, over the life of the loan you will have smaller payments but ay more interest with the 30-year mortgage
False
In determining the amount of your loan, you should ask for about 20% more than your need for financing flexibility in the future
False
In securing personal loans from family members or friends, the loan agreement should be verbal or consist of a gentlemen's understanding
False
Independent insurance agents are those that work for one particular company
False
Insurance should be considered even when there is a small likelihood that an event will cause a financial loss
False
It is usually better to lease a vehicle than buy one since, you are not responsible for the repairs or maintenance on a leased car.
False
Most individuals pay for a home with a down payment of 5% or less and then obtain a mortgage to finance the rest
False
On an amortization schedule, more interest and less principle is paid each month as the loan matures
False
Online realtors services are more convenient, but usually charge higher commissions than traditional full-service real estate companies
False
Property damage liability covers damages to your car from accidents that are your fault
False
Shopping for automobile insurance should begin immediately after you close the deal on the car
False
Since real estate brokers are licensed and bonded, they are required to give you unbiased information about real estate purchases.
False
The first step in the risk management process is to insure against risk.
False
The monthly payment for a loan is dependent only on the size of the loan and the interest rate
False
When applying for a personal loan, you will be required to fill out a loan application but you will seldom need a personal balance sheet
False
when selling a home, which of the following costs will you incur? A. Loans origination Fee B. Realtor's commission C. Title search and insurance D. Points
Realtor's commission
If the lender has the right to take certain specified assets of the borrower in the event of a default on the loan, the loan is a _____ loan
Secured
A personal loan is different from a credit card in that it's normally used to finance one large purchase
True
Auto loan internet sites are a good source to estimate the maximum amount you can borrow, based on financial information you provide
True
Buying a new car from a dealer with a set price ( a no haggle dealer) is usually more stress-free and less time consuming.
True
If a loan is cosigned and the borrower defaults, the lender has a right to sue the cosigner or try to seize has assets just as if he were the borrower
True
If the interest rates are the same, a loan using add-on interest will have higher payments and chargers than a loan using simple interest
True
In determining the amount of down payment and monthly mortgage payments you can afford, you should maintain some extra funds for liquidity purposes to cover unanticipated bills
True
Longer maturities for loans results in lower monthly payments & therefore easier to cover payments each month.
True
One method of managing risk is to accept risk by seeking to limit your exposure to a financial loss
True
The decision to purchase versus lease a car is highly dependent on the estimated market value of the car at the end of the lease period.
True
The most common source of financing is a personal loan from a financial insitution
True
The purchase of a home represents liability if you need to move quickly and the home does not appreciate rapidly in value
True
When Borrowing money from a family member or friend, the loan agreement should be in writing and signed by all parties
True
your monthly payments for a house are likely to be as high as rent when you factor in mortgage payments, property taxes, homeowners insurances, and home repairs.
True
If you obtain an FHA or VA loan you will make additional payments each month to cover your home insurance and property taxes that will be placed in an account callen
escrow account
When the borrower and the lender have agreed to the specific terms of the loan these will be included in the ______
loan contract
