Multiple Choice:
Question 1. Which of the following are helpful in keeping your credit card rates and fees low?
A. Make every payment on time
B. Maintain a balance that is less than 30% of your credit line
C. Carefully read monthly statements for additional fees and read mail regarding adjustment notices
D. All of these
Question 2. Elijah is looking at student loans. Which one should he choose if he doesn't want to pay current interest?
A. Subsidized
B. Unsubsidized
C. Private
D. All of these options would require him to pay interest
Question 3. If you compound interest monthly your annual percentage yield will be?
A. The same as your annual percentage yield
B. Greater than the annual percentage yield
C. Lower than the annual percentage yield
D. Will not be affected by annual percentage yield
Question 4. Which is true when trying to get a loan?
A. The lower the risk, the lower the rate
B. The lower the risk, the higher the rate
C. The higher the risk, the lower the rate
D. The risk and rate are unrelated
Question 5. What are the 5 Cs of the credit decision?
A. Contacts, conditions, collateral, cosigner, and capacity
B. Character, capacity, collateral, capital, and conditions
C. Cost, contacts, conditions, collateral, and capital
D. None of these
Question 6. Which of the following best defines a secured credit card?
A. The credit card company allows you to borrow money based on your promise to repay
B. It requires a security deposit equaling the credit limit of the credit card
C. It is useful for those just starting to build credit
D. Requires a security deposit AND is useful for building credit
Question 7. What is credit?
A. A type of card
B. The same as debit
C. A contractual agreement in which a borrower receives assets upon full payment over a period of time
D. A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest
Question 8. Which of the following refers to the amount of time you have to pay your credit card bill before finance charges are activated?
A. Credit Limit
B. Billing Cycle
C. Grace Period
D. Minimum Payment
Question 9. Which of the following are true regarding secured credit cards?
A. A secured credit card requires a security deposit equaling the credit limit of the card
B. If payments are not received, the credit card company can receive its money by cashing in the security deposit
C. Secured credit cards are ideal for those who are starting to build credit or who are trying to rebuild their credit history
D. All of these
Question 10. Which of the following is an advantage of renting?
A. You can personalize your living space
B. It can provide tax advantages
C. You can gain equity
D. There are no unexpected home repair bills
Question 11. What does the term Debt to Income Ratio refer to?
A. How much of your income you spend on your mortgage.
B. Percent of your income designated to paying back debt.
C. Based on the assessed value of your property used to pay for schools.
D. None of the above.
Question 12. Which is not a selection criterion when searching for a home?
A. Taxes
B. Schools
C. Interest rate
D. Location
Question 13. What do you call a stream of equal payments received or paid at equal intervals in time?
A. A lump sum
B. An annuity
C. Discounting
D. Future value
Question 14. Your monthly mortgage payment should be no more than what percent of your household income?
A. 25%
B. 28%
C. 36%
D. 40%
Question 15. What is a fixed rate mortgage?
A. Interest and monthly payments remain the same for entire period of loan.
B. Debt to Income ratio should be no more than 36% of household income.
C. Based on the assessed value of your property used to pay for schools.
D. Interest and monthly payments remain the same for a period of time and then adjusts each year due to market conditions.
Question 16. One disadvantage of renting is ?
A. You are able to move easily
B. Low initial cost
C. You gain equity as you pay
D. You do not gain equity as you pay
Question 17. Which of the following is not a step toward purchasing an automobile?
A. Close the deal
B. Shop for financing
C. Analyze needs vs. wants
D. Take the first offer
Question 18. A new car depreciates to in the first three years of ownership.
A. 50%; 60% C. 35%; 40%
B. 25%; 40% D. 40%; 50%
Question 19. Which of the following statement is true?
A. There is no cost associated with purchasing a new car.
B. New car has cheaper car insurance.
C. New cars get better gas mileage than new cars.
D. There are repair cost associated with both cars.
Show all work for full credit
Question 20. Suppose you are in the 33% tax bracket and itemize your deductions. You can rent an apartment for $1700 per month or purchase a house for $2200, assuming that an average of $1600 of your mortgage payment will go to interest this year.
a) How much is your monthly deduction savings on your mortgage?
b) How much is your true mortgage cost after your deduction?
c) Is it cheaper to rent or to own after considering your mortgage interest deduction?
Question 21. Suppose you maintain an average monthly balance of $2255 on your credit card. You are charged 9% annual interest rate.
a) How much is your minimum payment due on your monthly bill?
Question 22. Suppose you max out your $8,500 limit credit card with an APR of 18%. You want to pay off the loan in 4 years.
a) Calculate the monthly payments.
b) Calculate the total payment over the term of the loan.
c) How much goes to principle?
d) How much goes to interest?
Question 23. You must decide whether you should buy or lease a new car. The purchase price of the vehicle is $21,500. You may lease the vehicle over a 3 year period. Under the terms of the lease, you make a down payment of $1400 and monthly payments of $265 per month. If the residual value of the car is $9500, you sell the car at the end of the three years or return the vehicle if you lease.
a) How much does it cost to purchase the car for the 3 years?
b) How much does it cost to lease the car for 3 years?
Question 24. Suppose you have a monthly income of $4800.
a) How much should you designate to paying off debt if your debt to income ratio is at 36% or less?
b) If your home mortgage payment is $1275 a month and student loans of $170 a month, what is your monthly income available for loan?
Question 25. Suppose you borrow $135,000 to purchase a home. If you borrow the money from a bank offering a 20 year fixed rate of 3.15% with closing costs of $8,500 and 4 points.
a) What will your monthly mortgage payments be?
b) What is the total amount you will make in mortgage payments over the 30 years?
c) What will the total closing cost be including points?
d) What is the total cost to purchase this home under these options?