Personal Finance Chapter 8

True or False: The prepayment privilege allows the borrower to make early cash payments toward the principal balance on their loan. True
Jessica is buying her first new home. The home has been appraised at $330,000. For Jessica to not have to pay private mortgage insurance she must come up with a down payment ofa. $33,000.b. $66,600.c. $20,000.d. $80,000. b
As a rule of thumb, your PITI costs shouldn’t exceed _____ of your pretax monthly income.a. 8 percentb. 18 percentc. 28 percentd. 48 percent c
True or False: Smart buying what you want first and figuring out how you’ll pay for it later. False
Which one of the following is not a key to finding housing that fits your needs?a. Locationb. Deciding what features you are looking forc. Present needsd. Insurance costse. Future needs d
What questions should you answer before deciding to purchase a house?a. Will my life be stable or in transition in the next few years?b. Is my job and the company I work for stable and secure?c. Do I understand the responsibilities of home ownership?d. All of these are correct. d
Congratulations! You have just agreed on the final price for your new car and now you have to finance the purchase. The negotiated price of the new car is $18,500 and you will receive $5,500 for your trade-in. What will your monthly payment be on a 48-month loan with a 7% APR?a. $281.25b. $311.30c. $385.42d. $443.01 b
When you decide to buy a home, which of these questions should be answered?a. What is the maximum amount that a bank will lend me?b. Should I borrow up to this maximum?c. How big of a down payment can I afford?d. All of these d
True or False: Automobile leasing is actually just a long-term rental agreement with the lessor. True
Jackie is considering obtaining a mortgage of $333,000. A lower APR is available, but she must pay 1.75 points to buy the rate down. How much must Jackie pay in dollars?a. $1,357b. $3,300c. $5,828d. $8,333 c
True or False: When making a smart purchasing you don’t need to consider such charges as delivery fees, installation fees or service costs as these are already included in the purchase price. False
True or False: Stretching a car loan from 48 months to 60 months means the car will end up resulting in a smaller monthly payment. True
True or False: The initial rate on an adjustable rate mortgage (ARM) is sometimes called the teaser rate. True
According to the Keown book, how does a consumer avoid predatory lending?a. Regulationb. Legal actionc. Knowledged. Steering c
Which of these is not an advantage associated with an assumable loan?a. The new buyer does not incur the closing costs of a new loan.b. The new buyer may be able to get a lower interest rate than the current market rate.c. It is easier for the seller to sell the home.d. The new buyer does not have to qualify for the loan d
True or False: An appraisal is an estimate of what your home and property are worth. True
You are planning on starting your own business in 18 months and you intend to purchase a new home. You have looked carefully at your budget and have determined that you can afford a PITI of $900 per month. Your banker has told you that you can easily qualify for a PITI of $1,150 per month. Which of the following is the most reasonable explanation for this discrepancy?a. Your banker knows you really would be happier in a more expensive house.b. Your banker is not aware of your other long-term financial goals.c. Your banker’s number is more accurate than your number.d. None of these is a reasonable explanation. b
True or False: Evaluating whether you need or simply want a sun roof is an example of using the smart buying steps. True
All of the following are advantages of renting versus buying a home excepta. mobility.b. no property taxes.c. not responsible for home repairs or maintenance.d. control over remodeling and decorating decisions.e. no risk of falling housing prices. d
True or False: Subprime mortgages are illegal. False
Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant?a. Home ownershipb. A co-opc. A condod. A rental unit a
Suppose that you were thinking about leasing a new vehicle. Which of the following should not be an important consideration?a. I drive less than 15,000 miles annually.b. I like to get a new car every few years.c. I dislike the hassle of trading-in or selling cars.d. It’s the only way I can afford the vehicle that I want.e. I dislike the hassle of maintenance. d
True or False: An automobile warranty provides coverage for the basic parts against manufacturer’s defects for a set period of time or miles. True
Kathy is buying her first home. She is financing a total of $185,000 at an APR of 5% for 25 years. How much are her monthly payments?a. $952.33b. $1,081.49c. $1,441.23d. $1,664.85 b
True or False: From a financial perspective, the decision of whether to rent or buy is tied to how long to plan to live in the home. True
True or False: Smart buying means enjoying the highest standard of living that you can based on your income and budget. True
Your friends just told you that they were denied a mortgage by their bank. The loan officer told them that they did not pass the 36 percent rule. They are confused and want you to explain what happened?a. The house you were looking at was more expensive than you can comfortably afford.b. You need to come up with a larger down payment.c. You pay too much in other debt payments every month.d. All of these could be correct.e. None of these could be correct. d
True or False: If the roof of your condominium building needs expensive repairs, then the condominium board will pay for repairs at no expense to you. False
The two most common types of two-step mortgages are thea. 1/29 and 3/27.b. 5/25 and 7/23.c. 8/22 and 12/18.d. 13/17 and 15/15. b
______ is a publication that provides unbiased ratings and recommendations for a host of products and servicesa. USA consumerb. Consumer reportsc. People magazined. Bloomberg weekly b
You disagree with Ed shifty Smith, a car sales person, on the price of an open end lease. He says the depreciation charge is only $6000. What is the actual depreciation charge for a car now worth $23,000 that is expected to drop a value to $15,000 in two years?a. $7000b. $7500c. $8000d. $11,500e. $15,500 c
Which did you consider when househunting?a. Selling priceb. Neighborhoodc. School districtd. All of these d
True or False: It is advisable to always take the biggest one that a lender will give you. False
You have an annual gross income of $36,000. Using the 28/36 rule for maximum mortgage payment (PITI) estimation, what is your maximum PITI payment using your monthly gross income as a guide (28%)?a. $840b. $1080c. $680d. $640e. $880 a
Rhonda is buying a second home to use as income property. She is financing 75% of the homes $100,000 value. Her bank is holding her the money for 10 years and APR of 4.5% how much are Rhondas mortgage payments? a. $441.28b. $598.74c. $777.28d. $958.44e. $1014.33 c
True or False: stretching your car loan from 48 months to 60 months means the car will end up costing you more when you get paid in full. True
The _____ mortgage sets the payments in advance in such a way that they rise steadily for 5 to 10 years, then level off to allow a person to buy a home earlier in life.a. Balloon paymentb. Growing equityc. Shared appreciationd. Graduated paymente. Conventional d
True or False: An adjustable rate mortgage (ARM) is always a wise financial decision for young consumers because their incomes will be adjusting as well. False
True or False: PITI stands for the total of your monthly principal, income, taxes, and insurance. False
True or False: A real estate short sale is a sale of property where the proceeds from the sale exceed the balance owed on the property. False
True or False: an automobile warranty provides coverage for the basic parts gives manufactures defect for a set period of time or miles. True
True or False: A loan origination fee is a fee paid to the lender, generally in the $1200-$1300 range, and cover some of their cost of processing and finalizing the loan False
True or False: One of the main barriers to homeownership is the down payment True
How can you benefit from following the smart buying steps?a. Smart buying allows a higher standard of living because you can make smart purchasesb. Smart buying allows you to buy what you want when you want itc. Smart buying helps you maintain your budgetd. Both smart buying allows a higher standard of living because you make smarter purchases and smart buying helps you maintain your budget are correct d
Billy has chosen to purchase a new vehicle. The vehicle cost $15,000. His APR is 10% and he will be financing the vehicle for 36 months. How much will Billy pay each month for his new vehicle?a. $484.01b. $296.35c. $312.66d. $405.29e. $496.33 a
A ____ typically originates mortgage loans with funds from other investors, such as pension fundsa. Mortgage bankerb. mortgage brokerc. Mortgageed. Mortgagore. None of these a
True or False: subprime mortgages are mortgages taken out by people with low credit scores True
Hector and Maria GonzalesHector a Maria have been married for almost one year now and are thinking about buying a house. Maria is an executive for a large, multi-national corporation with offices around the world. She has been told by her company that she will be transferred to a new location every three years. Hector is a car salesman and he is willing to move to wherever Maria gets transferred. Together they make $8,000 in gross monthly income and pay 40% in taxes and withholdings every month. Between them they have monthly payment of $400 in student loans and $700 in car loans, and their credit cards payments average $450 per month. They currently lease a luxury condo for $1,400 per month. They travel to Cancun every Christmas. Since they both work a lot of hours, they eat out at restaurants for most meals. They currently have nothing in savings but Hector’s grandparents have said they will give them a 20% down payment for the new home. They have found a very nice town house available for $200,000. Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%, what will their PITI be? Annual property taxes are $2,400 and homeowner’s insurance premium is $900 per year.Select one:a. $1,027.14b. $1,283.93c. $1,302.14 d. $1,558.93 $1,302.14
How can you benefit from following the smart buying steps?Select one:a. Smart buying allows a higher standard of living because you make smarter purchases.b. Smart buying allows you to buy what you want when you want it.c. Smart buying helps you maintain your budget.d. Both Smart buying allows a higher standard of living because you make smarter purchases and Smart buying helps you maintain your budget are correct. Both Smart buying allows a higher standard of living because you make smarter purchases and Smart buying helps you maintain your budget are correct.
When you decide to buy a home, which of these questions should be answered?Select one:a. What is the maximum amount that a bank will lend me?b. Should I borrow up to this maximum?c. How big of a down payment can I afford?d. All of these All of these
A mortgage with an APR higher than normal is a subprime mortgage.Select one:True False True
Which of the following is not a one-time fee connected with purchasing a house?Select one:a. Down paymentb. Private mortgage insurance c. Closing costsd. Pointse. Origination fee Private mortgage insurance
What kind of valuable information can you find online at websites such as Edmunds.com or Autosite.com concerning smart buying for automobiles?Select one:a. The dealer cost and dealer holdback for the automobile you are interested in.b. The trade-in value on your current automobile.c. The final price you will pay for the automobile at the dealership.d. Only The dealer cost and dealer holdback for the automobile you are interested in and The trade-in value on your current automobile are correct. e. All of these are correct. Only The dealer cost and dealer holdback for the automobile you are interested in and The trade-in value on your current automobile are correct.
A ________ typically originates mortgage loans with funds from other investors, such as pension funds.Select one:a. mortgage banker b. mortgage brokerc. mortgageed. mortgagore. None of these mortgage banker
Being able to move with minimum inconvenience is an appealing aspect of buying a home.Select one:TrueFalse False
Which of the following is not an advantage of living in a condo?Select one:a. Limited maintenanceb. Building equity for resale and investmentc. Direct ownership of a specific unitd. Freedom from neighbors Freedom from neighbors
Which of the following factors plays a role in determining the monthly lease payment of a car?Select one:a. The agreed-upon price of the vehicleb. The length of the leasec. Your down payment plus any trade-in allowance or rebated. The value of the vehicle at the end of the leasee. All of these All of these

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