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