fin

Question 1

Sources of personal loans​ include:

Answer 1

commercial​ banks, savings​ institutions, finance​ companies, and credit unions.

Question 2

Loan agreements with family and friends​ should:

Answer 2

Loan agreements with family and friends​ should:

Question 3

In the loan application​ process, the information the borrowers must supply to the lenders​ is:  

Answer 3

a personal balance sheet and a personal cash flow statement.

Question 4

From the personal cash flow​ statement, lenders can​ determine:  ​(Select the best answer​ below.)

Answer 4

if borrowers have sufficient cash flow to cover their loan payments.

Question 5

Interest rates are​ usually:  ​(Select the best answer​ below.)

Answer 5

lower on secured loans because the lender has less to lose in the event the loan is not repaid.

Question 6

Loans backed by collateral are​ called:  ​(Select the best answer​ below.)

Answer 6

secured loans.

Question 7

Collateral​ includes:  ​(Select the best answer​ below.)

Answer 7

assets used to back a loan in the event that the borrower defaults.

Question 8

What are your responsibilities if you cosign a​ loan? What are the potential consequences of failing to live up to your responsibilities as a​ cosigner?

If you cosign a​ loan

Answer 8

you can be required to pay the balance of the loan not repaid by the borrower.

Question 9

If you fail to live up to your responsibilities as a​ cosigner,:

Answer 9

it may restrict the amount you can borrow

Question 10

What is the purpose of the annual percentage rate​ measurement?

The annual percentage rate​ (APR) measurement:

Answer 10

calculates both interest and other fees on a loan on an annualized basis.

Question 11

Could lenders with the same interest rate report different​ APRs?

Answer 11

​Yes, depending on the other fees charged.

Question 12

Simple interest is:

Answer 12

the sum of the principal paid on the loan divided by the loan amount.

Question 12

Simple interest is measured using the​ principal,

Answer 12

the interest rate applied to the​ principal, and the​ loan’s maturity.

Question 13

What information is NOT contained in a loan repayment schedule.

Answer 13

A comparison of your interest rate and the current interest rate.

Question 14

Loan payments under the simple interest method are usually lower than loan payments under the​ add-on interest method because​ the:  ​(Select the best answer​ below.)

Answer 14

interest is calculated on the remaining balance.

Question 15

Which of the following is not one of the disadvantages of leasing a​ car?  ​(Select the best answer​ below.)

Answer 15

Your equity in the car is limited to your lease payments.

Question 16

Which of the following is a characteristic of a student​ loan?

Answer 16

The tax benefits are phased out for individuals who are in high tax brackets.

Question 17

What is home​ equity? Describe how a home equity loan works.

Home equity​ is:

Answer 17

the difference between the market value of the home and the debt on the home.

Question 18

A home equity loan​ is

Answer 18

a line of credit that allows the homeowner to borrow against the equity in their home.

Question 19

The two financial components you must consider before purchasing a home are​ the:

Answer 19

down payment and the monthly mortgage payments.

Question 20

When determining an affordable down​ payment, you should​ consider:

Answer 20

the market value of your assets.

Question 21

When determining affordable monthly mortgage​ payments, you should​ consider

Answer 21

your monthly cash inflows and outflows.

Question 22

​Fixed-rate mortgages offer a fixed rate of interest​ for

Answer 22

15 or 30​ years, and are preferred by many homeowners because their payment is not tied to market interest rates.

Question 23

An amortization table discloses the monthly mortgage payment based on​ the:

Answer 23

mortgage​ amount, a specified fixed interest​ rate, and a maturity.

Question 24

Each mortgage payment​ represents

Answer 24

a portion of payment towards the principal and a portion of payment towards the interest.

Question 25

An adjustable rate-mortgage contact:

Answer 25

must specify the frequency at which the mortgage rate may adjust.

Question 26

An umbrella personal liability​ policy:

An umbrella personal liability policy becomes effective when your auto and​ homeowner’s policy limits​ are: 

Answer 26

provides additional liability coverage to auto and​ homeowner’s insurance policies.

Exhausted.

Question 27

Renter’s Insurance:

Who should consider purchasing​ renter’s insurance?

Answer 27

protects against damage due to weather, which is ALSO covered by homeowner’s insurance.

provides liability coverage for injury to those who might be hurt on your premises​, which may also be specified by homeowner’s insurance.

All renters should purchase​ renter’s insurance, if only for the liability protection.

Question 28

Homeowner’s insurance:

Answer 28

cover’s your home and contents, which is not covered by renter’s insurance.

Question 29

One step you could take to reduce your​ homeowner’s insurance premium​ is:

Answer 29

-shop around for insurance.
-install storm shutters.
-improve protection.
-install a security system.
-increase your deductible.

Question 30

A​ homeowner’s insurance premium will be higher​ if:

Answer 30

the deductible is lower