Finance Exam 2

A trust A legal agreement that provides for the management and control of assets by one party for the benefit of another
A savings account Franklin is planning for a purchase pf a vehicle in two years. Since he wants to be certain that his funds are safe (insured), what should he use?
Deposit Institution A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions.
A finance company NOT a deposit institution
Payday Loan Company Usually provides the most expensive loans
Compounding Earning interest on previously earned interest
Money Market Account (Define) An interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability.
Money Market Account Justin needs to have access to his money in 5 months. The best option for his savings is a
Annual Percentage Yield (APY) The Truth in Savings Act requires financial institutions to disclose the ____________ on savings accounts.
A debit card Quentin wants his retail purchases to be deducted directly from his checking account. What tool should he use?
3.6% What is the APY for a savings account with a $250 balance that receives $9 interest for the year?
5.76% Nicholas earned 8% in his savings account. If he is in the 28% tax bracket, what is his after-tax savings rate of return?
Make it easier to make payments on past credit purchases. Many people expect their incomes to increase to
1. Default2. A less satisfying life3. Bankruptcy4. Loss of creditworthiness When misused, credit can result in
$90 Tanya received a $1,000 loan from the bank for a vacation. The bank is using the simple interest formula for this one-year, 9% loan. What is her total interest?
4% Becka borrowed $100 from her cousin at the rate of 6% per year. Ifthe inflation rate was 2% that year, what is her cousin’s actual rate of return on the loan?
$23 Peter borrowed $225. He paid $20 interest and a service charge of $3.00. What is his finance charge?
19% Johnson has net monthly income of $2,500. She has a monthly auto loan payment of $275, a student loan payment of $150, and a credit card minimum payment of $50. What is her debt-payments-to-income ratio?
$200 If Vince charged $200 on his credit card with 18% APR and he paid his balance in full within the grace period, how much was he required to pay?
$110,000 Acme Home Lending offers home equity loans up to 80% of the home value for its customers. If Sally Johnson has a home valued at $200,000 and a current mortgage of $50,000, how much can she borrow in a home equity loan from Acme?
Papers with personal information What items should be shredded to protect yourself from identity theft?
You receive bills for a credit card account you never opened What is often the first sign of a stolen identity?
$24,560 How much to buy a car?Down payment: $3,000Monthly loan payment: $350 per month (6 years)Opp. cost of down payment: $3,000 x loan period (in years) x 2% interestEstimated value of vehicle at end of ownership period: $4,000
$18,350 Cost to lease a car?Security deposit: $300Monthly lease payment: $300 monthly (5 years)Opp. cost of down payment: $300 x loan period (years) x 2% interestEnd of lease charges: $500
$0.05 per ounce The unit price of a 64-ounce carton of orange juice that costs $3.20 is
Prepaid legal services If you want to pay a set fee to receive unlimited or reduced-fee legal assistance, you should use
An Attorney Steven needs to write a will. His best resource is
Mediation A process used to settle grievances in a nonbinding process is called a
Car dealer Craig wants to get his old car repaired, but he doesn’t want to spend much money. He probably will NOT want to go to the most expensive repair service, which is from
Maintenance and repairs A variable operating cost for a vehicle is
A variable cost is A cost that varies in relation to changes in the volume of activity
Negative equity The lowest payment does not necessarily mean the best credit plan. If your car loan is a long period of time, you may end up owing more than the car is worth, which is called
1. Residual value2. Money factor3. Payment schedule4. Capitalized cost What is associated with a vehicle lease?
Tenants cannot take tax deductions for mortgage interest and property taxes What is a disadvantage of renting?
Conditions under which the landlord may enter the apartment What is part of a tenants lease agreement?
Cooperative housing What is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building?
Down payment Frank and Diane want to buy a house. What do they need before they purchase a house?
The seller may reject the offer and choose to give a counteroffer Kelly selected a home and submitted an offer to the seller. Now…
Contingency clause Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer.
The deductibility of the loan interest on federal taxes The primary benefit of a home equity loan is
$12,270 Total annual cost associated with renting?Monthly rent: $1,000Annual rent insurance: $250Annual interest lost on security deposit: $20Value of apartment: $150,000
$17,900 Annual cost of owning?Home value: $300,000Annual mortgage payment: $19,200Annual prop. taxes: $4,800Annual homeowner’s ins.: $1,200Maintenance: 1% of HVGrowth in equity: $3,000Tax savings: $2,800Annual appr.: 1.5% of HV
$180.50 If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal?
Principal Refers to the amount borrowed or the amount still owed on a loan, separate from interest

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