1. If you’re considering purchasing a new home, the mortgage
lender will probably require a down payment. The amount will
be based on the lender’s required
A. loan-to-value ratio. C. home listing value.
B. credit investigation. D. market conditions.
2. Another requirement of lenders in considering mortgage loans
is the borrower’s ability to repay the loan. In this regard, lenders
often calculate an affordability ratio that’s
A. total debt payments, including the proposed loan, to
B. total monthly payments on all debt to gross income, plus
C. net income to total mortgage interest.
D. monthly mortgage payments to monthly gross income.
3. Variable auto ownership costs are most dependent on
A. driver behavior. C. city lived in.
B. mileage driven. D. down payment.
4. There are now many different types of transaction accounts. Entities that have grown very rapidly by pooling funds and offering check type transaction services are
A. commercial banks. C. savings and loan organizations.
B. credit unions. D money market mutual funds.
5. Poor record keeping and bad cash management can result in a check being drawn on your bank with insufficient funds. This problem is known as a(n)
A. illiquid check. C. early withdrawal.
B. overdraft. D. check draft.
6. You must get money to your son in another city so that his account has “good funds.” A bank service that would be useful is
A. electronic funds transfer. C. overnight mail.
B. automated teller transaction. D. certified check.
7. The day-to-day management of our finances to ensure that we have money available to meet obligations is called
A. liquid assets. C. financial management.
B. cash management. D. check balancing.
8. Which of the following would you expect to pay the highest rate of interest?
A. Cash C. Savings account
B. Checking account D. Certificate of deposit
9. If you went to an institution that specialized in real estate mortgage loans to request a first mortgage loan for your new house, you would probably be at a
A. commercial bank. C. savings and loan.
B. real estate broker. D. brokerage company.
10. You’ve decided to start a regular savings program. While the best amount of liquid savings for anyone depends on that person’s unique circumstances, a rule of thumb would be to have enough savings for
A. one year of total income.
B. one year of after-tax income.
C. two months of after-tax income.
D. three to six months of after-tax income.
11. You’ve opened a savings account in the amount of $10,000 with a nominal or offered interest rate of 5% and quarterly compounding. You leave your money in the account for exactly one year, ending at the end of the quarter. Approximately how much money is in your account, including interest?
A. $10,500 C. $10,525
B. $10,509 D. $10,552
12. You have a regular savings plan in which you’ve set aside $1,000 in a money market account that compounds interest every month. Assuming the nominal interest rate is 6%, how much money will you have in your account at the end of a year?
A. $938.32 C. $1,061.68
B. $1,060.00 D. $1,072.00
13. If you calculated the interest rate that you actually earned in 11 and 12 above, you would have calculated what rate?
A. Nominal C. Offered
B. Traditional D. Effective
14. One of your concerns when you consider opening deposit accounts is the safety of your money. Fortunately, many financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC). However, the FDIC limits the amount of insurance for a single depositor to the amount of
A. $100,000. C. $1,000,000.
B. $10,000. D. $1,000.
15. In the lease versus buy decision for an automobile, one of the most critical economic factors isn’t known but must be estimated. That factor is
A. the vehicle purchase price. C. the required payments.
B. the residual value. D. the financing costs.
16. If you intend to drive the same car for 10 years, you would most likely
A. buy a used car. C. enter into an open-end lease.
B. enter into a closed-end lease. D. buy a new car.
17. The major economic difference in evaluating an open-end lease versus a closed-end lease is
A. the term. C. the residual value.
B. the interest rate. D. the down payment.
18. In the rent-or-buy decision, which factor would be an important economic consideration?
A. The number of bathrooms
B. The ability to deduct interest expense on your tax return
C. The ages of your children
D. The use of a real estate broker
19. When buying a home, you want to make sure your ownership can’t be disputed later on. One way for your settlement attorney to help ensure this is to arrange for a
A. settlement binder. C. release form the listing broker.
B. closing statement. D. title check.
20. You’re looking for a first mortgage loan with the lowest possible interest rate and may have to move in a few years. Therefore, the best type of loan for you is probably a(n)
A. conventional fixed-rate mortgage.
B. adjustable-rate mortgage (ARM).
C. home equity loan.
D. unconventional fixed-rate mortgage