Categories
Finance Flashcards

Macro Chapter 14

Government budget​ deficit: An excess of government spending over government revenues during a given period of time.
It may be argued that the effects of a higher public debt are the same as the effects of a higher deficit because a higher deficit creates a higher public debt.
Public​ debt: The total value of all outstanding federal government securities.
Which of the following statements is true when considering budget deficits and the national​ debt? The national debt is a stock variable and a federal budget deficit is a flow variable.
The federal government has its best opportunity to lower its national debt when it has a budget surplus.
If the federal government has a budget deficit it can finance its spending by selling Treasury bonds.
Which of the following statements is true regarding the national debt and federal government​ deficits? There is a positive relationship between the national debt and a federal government budget deficit.
Since the​ 1940s, more often than​ not, the U.S. federal government has run a budget deficit.
Since​ 2001, more often than​ not, the U.S. federal government has run a budget deficit.
Which of the following is a reason for this resurgence in federal government budget​ deficits? Tax revenue not keeping pace with growth in spending
Since 1970 the U.S.​ government’s budget deficit as a percentage of real GDP has averaged approximately​ 3%.[On average the deficit has been approximately​ 3%. Remember that is the annual budget deficit NOT the national debt]
If a government spends more than it receives during a​ year, then during this year it experiences a​ ________, and if it spends less than it​ receives, it experiences a​ ________. budget​ deficit; budget surplus
The total value of all outstanding federal government securities is the public debt.
Since​ 2001, the average annual government budget deficit has exceeded 10 percent of GDP. False
The federal budget deficit is a​ flow, whereas accumulated budget deficits represent a stock, called the public debt.
If federal budget deficits ​increase, then a part of that deficit will be financed by foreign dollar​ holders, who will buy fewer U.S.​ exports, thus increasing the U.S. trade deficit.
A trade deficit implies that the dollar value of imports exceeds the dollar value of exports.
Generally a larger US trade deficit is accompanied by a a larger US federal government budget deficit
Suppose the dollar value of imports to the U.S. exceed the dollar value of exports from the US. This implies that foreigners are holding an excess supply of dollars.
If foreigners have an excess supply of dollars after trading goods and services they will likely buy more U.S. Treasury bonds.
If the U.S. federal government operates with a budget deficit it must borrow. In order to entice people to lend money to finance this​ deficit, the U.S. government must pay a higher rate of interest on the bonds it sells.
A natural consequence of the government continually spending more than what it takes in through tax​ receipts, ceteris​ paribus, is that the government takes up a larger percentage of the economic activity.
There is an ______ relationship between the interest rate and the price of a bond. inverse
As the interest rate or yield on U.S. bonds​ increases, foreigners buy more U.S. bonds and fewer U.S. goods and services.
From the end of WWII through 1983 the U.S. government had consistently experienced a trade surplus
Smaller trade deficits tend to accompany larger government budget deficits. false
Other things​ equal, interest rates will​ ________ whenever there is​ ________ in deficits financed by an increase in borrowing. rise; an increase
In the presence of a​ short-run recessionary​ gap, government deficit spending can influence both real GDP and employment. true
In the long​ run, higher government budget deficits resulting from increased government spending​ and/or tax cuts will do all of the following except increase equilibrium real GDP.
Higher government deficits arise from increased government spending or tax​ cuts, which raise aggregate demand
Entitlements in the U.S. are non-discretionary expenditures that have been legislated by Congress.
The U.S. federal government has contemplated ways to reduce its national debt. Which of the following suggestions would best enable the government to achieve this​ goal? Reduce government​ spending, raise​ taxes, or both.
From an arithmetic point of​ view, a federal budget deficit can be wiped out by simply increasing the amount of taxes collected. true
Data supports the idea that tax increases can completely eliminate actual deficits. false
Entitlements are the most important component of the federal budget. true
Entitlements are growing faster than any other part of the federal government budget. true
The United States is not the only country that has experienced a significant increase in its public debt in recent years.
To assess the changes in a​ nation’s degree of public​ indebtedness, most economists examine ratios of net public debt to GDP
Between the late 1990s and early years of this​ century, most nations observed declines in the ratio of the net public debt to GDP.
Categories
Finance Flashcards

money and finance

Financial Markets and Institutions Involve the movement of huge quantities of money, affect the profits of businesses, and affect the types of goods and services produced in an economy.
The price of one country’s currency in terms of another’s is called The foreign exchange rate
Compared to interest rates in long-term U.S govt bonds, interest rates on three-month t bills fluctuate …. and are …. on average. more; lower
From 1980 to early 1985 the dollar … in value, thereby benefiting American …. appreciated, consumers
A Bond a debt security that promises to make payments periodically for a specified period of time
A stock is a security that is a claim on the earnings and assets of a corporation.
A weaker dollar benefits… and hurts… American Businesses; American Consumers
Banks, savings and loan associations, mutual savings banks, and credit unions have been adept at innovating in response to changes in the regulatory environment.
The bond markets are important because they are the markets where interest rates are determined
The price paid for the rental of borrowed funds (usually expresses as a percentage of the rental of $100 per year) is commonly referred to as the interest rate
A security is a claim on the issuer’s future income.
Interest rates are important to financial institutions since an interest rate increase …. the cost of acquiring fund and …. the income from assets. increases; increases;
Financial market activities affect – personal wealth.- spending decisions by individuals and business firms.- the economy’s location in the business cycle.
Monetary policy affects interest rates, inflation, and business cycles
A rising stock market index due to higher share prices Both increases people’s wealth and as a result may increase their willingness to spend and increases the amount of funds that business firms can raise by selling newly issued stock of these.
Banks, Insurance Companies, and Finance Companies are all examples of financial insts.
The largest financial intermediaries are Banks
Typically, increasing interest rates discourages corporate investments.
Monetary policy is chiefly concerned with the level of interest rates and the nation’s money supply
Economists group commercial​ banks, savings and loan​ associations, credit​ unions, mutual​ funds, mutual savings​ banks, insurance​ companies, pension​ funds, and finance companies together under the heading financial intermediaries. What function do financial intermediaries​ perform? do only act as middlemen, borrowing fund from those who have saved and lending these funds to others and help promote a more efficient and dynamic economy of these.
In recent years stock markets have crashed.
Money is defined as anything that is generally accepted in payment for goods and services or in the repayment of debt
Banks are important to the study of money and the economy because they do only provide a channel for linking this who want to save with those who want to invest and have been a source of financial innovation that is expanding the alternatives available to this donating to invest their money of these.
From the peak of the high-tech bubble in 2000, the stock market ________ by over ________ by late 2002. collapsed; 30%
A stronger dollar benefits ______ and hurts ______ American consumers; American businesses
The organization responsible for the conduct of monetary policy in the US is the Federal Reserve System
Black Monday was the stock market’s worst one-day drop
Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called Financial Markets
A declining stock market index due to lower share prices Both reduces people’s wealth and as a result may reduce their willingness to spend and decrease the amount of funds that business firms can raise by selling newly issued stock of these.
Banks are financial intermediaries that accept deposits and make loans
The largest one-day drop in the history of the American stock markets occurred inA) 1929.B) 1987.C) 2000.D) 2001. 1987
Stock prices since the 1980s have been extremely volatile
The central bank of the US is The FED
The stock market is important because it is the most widely followed financial market in the United States.
Changes in stock prices -Affect people’s wealth and their willingness to spend-Affect firms’ decisions to sell stock to finance investment spending -Are characterized by considerable fluctuations
Bonds that are sold in a foreign country and are denominated in that country’s currency are known as Foreign bonds
Adverse selection is a problem associated with equity and debt contracts arising from The lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities.
Which of the following can be described as involving direct finance? A pension fund manager buys commercial paper in the secondary market.
The country whose banks are the most restricted in the range of assets they may hold is A) Japan. B) Canada.C) Germany.D) the United States. The US
An investor who puts all her funds into one asset… her portfolio’s … decreases; diversificiation
A corporation acquires new funds only when its securities are sold in the primary market by an investment banks.
Financial Intermediaries exist because there are substantial information and transaction costs in the economy, improve the lot of the small saver, are involved in the process of indirect finance.
Intermediaries who link buyers and sellers by buying and selling securities at states prices are called dealers
Which of the following can be described as involving indirect finance? Only a corporation takes out loans from a bank and people who buy shares in a mutual fund of these.
Which of the following are not investment intermediaries? life insurance company, and a pension fund.
Which of following are securities. certificate of deposit, share of texaco common stock.
Which of the following statements about the characteristics of debt and equity are true. they both can be long-term financial instruments, they both involve a claim on the issuer’s income, they both enable a corp. to raise funds.
The purpose of diversification reduce the volatility of a portfolio’s return.
Financial intermediaries can substantially reduce transaction costs per dollar of transactions because their large size allows them to take advantage of economies of scale.
Which of the following are investment intermediaries? Finance companies, and mutual funds.
Long-term debt and equity instruments are traded in the capital market
When the least desirable credit risks are the ones most likely to seek loans, lenders are subject to the adverse selection problem
Are important financial institution that assists in the initial sale of securities in the primary market is the investment bank
Which of the following is a contractual savings institution? A life insurance company
The main sources of financing for businesses, in order of importance, are financial intermediaries, issuing bonds, issuing stocks.
Financial markets improve economic welfare because they do they allow funds to move from those without productive investment opportunities to those who have such opportunities and they allow consumers to time their purchases better of these.
The money markets is the market in which … are traded short-term debt instruments
Which of the following statements about financial markets and securities are true? Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the New York Stock Exchange.A corporation acquires new funds only when its securities are sold in the primary market.Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.
A … is when one party in a financial contract has incentives to act in its own interest rather than in the interests of the other party. Conflict of interest.
The government regulates financial markets for two main reasons. to ensure that financial intermediaries do not earn more than the normal rate of return and to improve control of monetary policy
When the potential borrowers who are the most likely to default are the ones most actively seeking a loan… is said to exist. adverse selection
A country whose financial markets function poorly is likely to experience economic hardship and financial crisis.
In financial markets, lenders typically have inferior information about potential returns and risks associated with any investment project. This difference in information is called asymmetric information
The largest depository institution (value of assets) at the end of 2009 was commercial banks.
When the borrower engages in activities that make it less likely that the loan will be repaid, ________ is said to exist. moral hazard
Foreign currencies that are deposited in banks outside the home country are known as eurocurrencies
The presence of ________ in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of financial markets. asymmetric information
Which of the following are secondary markets. The New York stock exchangethe us govt bond marketthe over the counter stock market
which of the following statements about financial markets and securities are true. The maturity of a debt instrument is the time (term) that has elapsed since it was issued.
Which of the following markets is sometimes organized as an over-the-counter market? The stock marketThe bond marketThe forex marketthe federal funds market
The riskiness of an asset’s return that results from interest rate changes is called interest-rate risk
Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding? 15 percent
The YTM of a one-year, simple loan of $400 that requires an interest payment of $50 is 12.5 percent
With an interest rate of 10 percent, the present value of a security that pays $1100 next year and 1460 four year from now is approximately 2000
The fisher equation states both the nominal interest rate equals the real interest rate plus the expected rate of inflation and the real interest rate equals the nominal interest rate less the expected rate of inflation of these are true.
Which of the following are true for a coupon bond? When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.
A bond’s future payments are called its cash flows
A $10,000, 8 percent coupon bond that sells for $10,000 has a yield to maturity of 8 percent
The nominal interest rate minus the expected rate of inflation defines the real interest rate.is a better measure of the incentives to borrow and lend than the nominal interest rate.is a more accurate indicator of the tightness of credit market conditions than the nominal interest rate.
(I) Prices of longer-maturity bonds respond more dramatically to changes in interest rates. (II) Prices and returns for long-term bonds are less volatile than those for short-term bonds. (I) is true, (II) false. Answer
A discount bond is also called a zero-coupon bond
If a $10,000 face value discount bond maturing in one year is selling for $9,000, then its yield to maturity is approximately 11 percent
A coupon bond pays the owner of the bond a fixed interest payment every period, plus the face value of the bond at the maturity date.
If a $10,000 face value discount bond maturing in one year is selling for $5,000, then its yield to maturity is 100 percent
If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is -8 percent
With an interest rate of 5 percent, the present value of $100 received one year from now is approximately $95
I) Prices of longer-maturity bonds respond less dramatically to changes in interest rates. (II) Prices and returns for long-term bonds are less volatile than those for shorter-term bonds. Both are false
Which of the following $1,000 face value securities has the highest yield to maturity?A 5 percent coupon bond selling for $1,000A 10 percent coupon bond selling for $1,000A 15 percent coupon bond selling for $1,000 A 15 percent coupon bond selling for $900 15 900
The interest rate that is adjusted for actual changes in the price level is called the
Categories
Finance Flashcards

National Finance

The first item to be paid out of foreclosure funds is the Costs of Sale – advertising, attorney fees, trustee fees, etc.
If the amount realized at a Sheriff’s sale upon a delinquent mortgage is more than the indebtedness, the excess belongs to the mortgagor.
Before foreclosure who has the right to reclaim the property forfeited due to a mortgage default the borrower, under the right of Equitable Redemption.
In a Deed of Trust, the party who holds, “Naked Legal Title” (one without possessory rights), and can claim the property without going through the courts is the trustee.
A mortgage clause used in refinancing the first mortgage which allows the second mortgage to take the first place is called subordination.
A buyer assumes the mortgage. How is the seller relieved of the liability? Novation
Which mortgage clause allows a lender to regain their investment if the borrower does not pay his payment? Acceleration
In which way are a mortgage document and promissory note similar? Both are contracts
A mortgage or deed of trust may be recorded.
On a $150,000 loan, the lender charges a 1 point service charge. How much does the borrower have to pay? $1,500
If a borrower purchases a property for $200,000, and borrows $160,000 he/she is said to have a LTV ratio of? 80%
The loan amount is $80,000, and the monthly principal and interest payment will be $499.00 a month for 30 years. How much interest will be paid over the term of the loan? $499 x 12 = $5,998, $5,998 x 30 = $179,640, $179,640 -$80,000 = $99,640
The cost of points is not deducted from the loan. Points are treated as a separate debit or charge on a settlement statement, charged to the party who has agreed to pay them.
Based on the theory, (a rule of thumb) how many discount points are required to increase the percentage yield on a mortgage from 11% to 12%? 8 points
A lender charges discount points on a loan to improve the lender’s yield.
To determine the monthly principal portion of a monthly loan payment you must deduct the monthly interest from the monthly payment.
Determine the monthly interest on a loan with a balance of $168,300, a monthly payment of $1,356.80, and an interest rate of 7.75%? $168,300 x 7,75% = $13,043.25, $13,043.25 ÷ 12 = $1,086.94
Remember for purposes of determining the new loan balance, you will not have to know how to determine the payment amount.
When determining a mortgage loan balance, the monthly loan payment interest is deducted from the payment.
A mortgage has a balance of $70,000 at 11.5% interest for a period of 25 years. The monthly P & I payment is $711.53, what is the interest charge for the second monthly payment? $70,000 x 11.5% = $8,050, $8,050 ÷ 12 = $670.83, $711.53 – $670.83 = $40.70, $70,000 – $40.70 = $69,959.30, $69,959.30 x 11.5% = $8,045.32, $8,045.32 ÷ 12 = $670.44
In Step 3 what do you subtract from the monthly payment amount to solve for the monthly principal? Current monthly interest
What is the balance on an amortized loan of $340,000 after the first payment if the interest rate is 6% with a monthly P&I payment of $2,028? $340,000 x 6% = $20,400, $20,400 ÷ 12 = $1,700, $2,028 – $1,700 = $328, $340,000 – $328 = $339,672
When a real estate loan uses both real and personal property as collateral for the loan it is called a (an) package mortgage.
A loan on real estate, that includes fixtures, and appliances used extensively in the sale of condominiums is a (an) package mortgage.
A mortgage where the interest rate fluctuates and is usually tied to an index; payment amount increases are capped for each period and for the term of the loan is called an Adjustable-rate Loan (sometimes called an ARM).
A type of mortgage which allows the lender to increase the outstanding balance of a loan up to the original amount of the loan in order to advance additional funds is called an open-end mortgage.
A situation where an owner sells his or her improved property and at the same time, signs a long-term lease with the buyer is called a (an) sale-leaseback.
A Budget Mortgage is a loan, which has a payment composed of the following? Principal, interest, taxes and insurance
A borrower applied for a VA guaranteed first time mortgage for $50,000; however, the property appraised for $46,000. If the buyer still wanted to buy the property which could happen? The VA could allow the borrower to make up the difference in cash
An FHA mortgage loan is obtained through which of the following? Qualified lending institutions
In 1975 a veteran paid off his VA loan and sold his house. Would he be entitled to another VA loan? Yes, because he paid off the first loan and sold the mortgaged property.
Rural Economic and Community Development (RECD) loans are either made directly by RECD or made by a private lender with RECD guaranteeing a certain percentage.
A veteran desired a loan to buy a 200 acre residence. There are no VA lenders in the area. Which could happen? The VA could loan the money themselves.
The primary purpose of private mortgage insurance (PMI) is to protect the lender.
What can the VA require a veteran do when obtaining a loan? Make the veteran automatically assume liability for the loan
The basic difference between an FHA and a VA loan is The FHA insures loans, the VA guarantees them.
Rural Economic and Community Development (RECD) loans are either made directly by RECD or made by a private lender with RECD guaranteeing a certain percentage.
When you obtain an FHA loan, what generally happens? An FHA appraiser must appraise the property
Private mortgage insurance is associated with conventional loans.
If a Veteran wanted to buy a $60,000 house in a city with a population of 100,000 people, which of the following loans could he NOT apply for? RECD loan
A veteran had a VA loan using his full entitlement. He allows another veteran to assume the loan without VA approval. Could he immediately get another VA loan? No, because he is still liable for the loan.
In 1975 a veteran paid off his VA loan and sold his house. Would he be entitled to another VA loan? Yes, because he paid off the first loan and sold the mortgaged property.
Conventional mortgage loans are not guaranteed or insured by any government agency.
Conventional mortgages usually require A larger down payment.
An FHA mortgage loan is obtained through which of the following? Qualified lending institutions
For a veteran to obtain a VA loan, the VA must issue a certificate of eligibility.
On a government backed loan, which of the following would be permitted concerning pre-payment penalties? Prepayment penalties are not allowed, under any circumstances, on VA or FHA loans.
Under which of the following would one MOST likely see an estoppel certificate? A lender sells a loan and the new mortgagee wants to know the existing balance
A qualified buyer is one who has demonstrated the financial capacity and credit worthiness required to afford the asking price. In qualifying a buyer the lender looks at these factors? Income, net worth and credit history
A Buyer has demonstrated the financial capacity and creditworthiness required to afford the asking price by providing the lender with all of the following, except an appraisal equal to or higher than the contract price.
Transfer taxes are generally paid by the seller
Assets include all of the following, except revolving and installment loan accounts.
When underwriting a mortgage loan a lender considers all of the following, except credit worthiness of the seller.
Settlement is another name for closing and brings the real estate transaction to completion.
A lender will look at which items when deciding to qualify a property? All of these items.
A qualified buyer is one who has demonstrated the financial capacity and credit worthiness required to afford the asking price. In qualifying a buyer the lender looks at these factors? Income, net worth and credit history
Many states charge what is called a transfer tax when the property is conveyed by one of the following means deed
When underwriting a mortgage loan a lender considers all of the following, except credit worthiness of the seller.
A Buyer has demonstrated the financial capacity and creditworthiness required to afford the asking price by providing the lender with all of the following, except an appraisal equal to or higher than the contract price.
All of the following were originally established to buy and sell mortgages in order to stimulate mortgage lending, except Maggie Mae (MGIC).
The two biggest money lenders of residential real estate mortgages are savings and loans and banks.
An increase in the availability of money would lead to which effects? Interest rates would go down
Which of the following is considered a part of the secondary mortgage market? Federal Home Loan Mortgage Corporation (FHLMC)
The primary distinction/s between the primary and secondary mortgage market is? The secondary market is fundamentally a holding or warehousing process.
The Federal National Mortgage Association (FNMA) sells seasoned mortgages and deeds of trust to individual investors and financial institutions. A seasoned mortgage is one that has been in existence for some time and has a good record of repayment by the mortgagor.
In terms of stating mortgage rate interest, the standardized rate required by the Truth in Lending Act to facilitate comparison loan shopping is called the annual percentage rate.
Which of the following advertised financing terms would NOT trigger a full disclosure under Regulation Z $265,000 sale price
A primary purpose of the Truth in Lending Act is to make loan cost information readily available to consumer borrowers.
Truth In Lending applies to all of the following, except commercial property.
Purchasing an investment property , like an apartment complex may be more rewarding if the investor has the required management skills.
The two major sections of the Truth In Lending law, includes advertising and Annual Percentage Rate (A.P.R.).
The Truth in Lending laws apply to the financing of single family residences.
Which agency administers RESPA? Consumer Financial Protection Bureau (CFPB)
Under the Real Estate Settlement Procedures Act (RESPA), lenders are prohibited from taking kickbacks or unearned fees.
A house sold for $42,000. The buyer made a 20% down payment. Monthly interest on the loan was $252. What was the interest rate on the loan? 9%
Who is NOT an originator of primary loans? FHA
Usury MOST nearly means ______________ illegal interest.
Who is the largest purchaser in the secondary market? Fannie Mae
A mortgage broker _____________ arranges loans between borrowers and investors.
An owner advertised “beautiful acreage only $5,000 down, owner will personally finance down payment.” Would this be in violation of the Truth in Lending Act? No, owners are not covered by Reg. Z.
A VA loan may be granted for the purchase of a one-family to four-family if _________________ the veteran agrees to live there.
A buyer wants to take out an FHA loan. The broker should refer the buyer directly to ______________ any approved lending institution such as a bank or savings and loan association.
The lender is not insured or guaranteed against a loss, by reason of the borrower’s default in repayment, under which type of loan? Conventional
If a single parent is applying for a real estate loan, when would the fact have to be revealed that part of the parent’s income is from child support? If the parent was relying on the income for repayment of the loan
Which of the following is considered a conventional loan? Commercial bank ARM loan
An impound or reserve account MOST benefits whom? The lender
If advertised alone, which would be in violation of TRUTH IN LENDING? “No down payment required”
On a $50,000 loan the borrower is required to pay 2 points. How much does the borrower have to pay the lender? $51,000.00
A home improvement company was negotiating with a home owner to add two rooms onto a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan? Friday, midnight
In most states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is this right called? Statutory right of redemption
All of the following are true of conventional loans except what? The requirements to qualify are uniformly fixed by state law.
The Pickets are purchasing a home for $78,000 and the lender is giving them a 90% loan at 10% interest, plus a 2% loan origination fee. How much is the loan origination fee? $1,404
In a repayment of a mortgage loan, which type of interest is used? Simple
RESPA would prohibit which of the following acts? Paying of kickbacks
In an installment land contract, what type of title did the seller retain? Legal
The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT: Recording fees and title insurance premiums
An increase in the availability of money would lead to which effect? Interest rates would go down.
Which of the following would usually occur in a sale-and-leaseback transaction? The property is sold on the condition that the new owner lease it back to the seller at the time title passes.
Under an FHA graduated payment mortgage, which of the following fluctuates over the term of the loan? Monthly payments
When the lender under a deed of trust required title insurance, who would be the most likely person to pay for it? The trustor
A borrower bought a $74,000 house with no down payment. The loan was probably ______________ a VA loan.
Which of the following describes a mortgage that requires principal and interest payments at regular intervals and calls for the liquidation of the debt by periodic installments until the debt is satisfied? Amortized loan
An owner was selling his own home. Can he advertise the down payment? Yes, because it was his own home
A buyer assumes the mortgage. How is the owner relieved of the liability? Novation
A standardized yardstick expressing the true annual cost of borrowing is expressed as a/an APR
Discrimination is prohibited in lending practices under _____________ ECOA.
The maximum permissible “loan to value ratios” are _____________ based on sale price or appraised value, whichever is lower.
Why would a mortgagee (beneficiary) have an appraisal on the property? To assure the property value is sufficient to cover the loan
Which of the following is true of a second mortgage? It is usually issued at a higher rate of interest.
The seller under a land contract is called _____________ the vendor.
A buyer wanted to use a promissory note for consideration on the purchase of a property. Can he do this? Yes, this is acceptable as long as the seller agrees.
In which of the following markets may a lender sell a loan that a mortgage banker has previously originated? Secondary market
A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called: Warehousing
The clause in a trust deed or mortgage which permits the mortgagee to declare the entire unpaid sum due upon a default by a mortgagor is called a(n) ______________ acceleration clause.
The Smiths’ purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller’s existing mortgage, which had a current balance of $23,000. The Smiths’ financed the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a Purchase money mortgage
When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment is called: A balloon payment
Under Regulation Z, consummation is defined as the time when a consumer becomes contractually obligated on a credit transaction.
On an 8% straight term loan of $6,071 the borrower paid total interest of $1,700. How long did he have the loan? 42 months
The Loan Estimate must be delivered to an applicant within three business days of loan application.
The discount points charged by a lender on a federal VA or FHA loan are a percentage of the ________________ loan amount.
Which transaction requires a securities’ license? Selling shares in Fannie Mae
The primary purpose of Truth in Lending is to _____________ disclose the true costs of obtaining credit.
______ is the cost per thousand that is required to create the principal and interest payment necessary to pay off a loan. A factor
Effective October 1, 2015, the real estate industry has new requirements as specified in the TILA/RESPA Integrated Disclosure (TRID) Rule.
Categories
Finance Flashcards

Personal Finance Exam 2

the cash value of a whole life insurance policy can be used as a source of loan collateral T
borrowing to pay for a college education is a legitimate use of credit T
commercial banks are generally more selective in granting loans than finance companies T
if a loan has a prepayment penalty, there will be an additional cost to repay the loan early T
the basic purpose of insurance is to protect you from the results of accidental losses T
spreading risk among a large number of people is a major principle of insurance T
Avoiding alcoholic beverage while driving is an example of risk reduction T
the needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits T
term insurance is generally the most economical form of line insurance for young families T
when you stop making premium payments on a whole life policy, the protection is immediately fortified. F
whole life policies typically provides a high investment rate of return F
one should typically name both primary and contingent beneficiares for life insurance policies T
you may reinstated your lapsed life insurance policy without answering health related questions again F
all types of life insurance offer a cash surrender value F
life insurance death benefits are not subject to income taxes T
in the long run stocks typically have a higher return rate than that of bonds T
a no load, low expense mutual fund is not a smart choice for investing F
stafford loans amy be subsidized or unsubsidezed T
investing is considered a short-term activity that involves the buying and selling of securites F
a personal consumer loan could be used to consolidate several loans into one, purchase a car, covers temporary cash shortfall, buy a mobile home
which of the following is accurate concerning 529 college savings plan earnings are tax-free when used for qualifying educational expenses
a loan from the cash value of your life insurance policy would be characterized by no specific repayment date
bob shockey borrowed $25k from his $250k cash value life insurance policy to send to his daughter to private college. assuming he pays interest as it accrues, if bob died before the debt is repaid his beneficiary will receive $225k
besides the financial charge, you should also consider ___ when you shop for a consumer loan loan maturity, total cost of the loan, collateral, and repayment penalties
when the simple interest method is used to determine financial charges, the interest is calculated based on the actual balance of the loan
annual percentage rate is equivalent to simple interest method
the annual percentage rate (APR) on a single payment loan for $1000 at a simple interest rate of 12% is 12%
you want to borrow $1000 at an interest rate of 10%. the most expensive method of calculating the collar cost of the interest on this installment loan will be the add-on method
the monthly payment on a 8%, 36 moth, add-on loan for $10,000 would be $344
sometimes it may be better to use savings rather than borrow to make a purchase. this would be recommended when the cost of borrowing is greater than the interest earned on the savings
underwriting is the determination of which exposures to insure
in the short run, stocks compared to bonds generally have much more risk
the risk/return concept is high risk/high return, low risk/low return
the difference between stafford’s subsidized and unsubsidized loans is subsidized loans do not accrue interest while in school. unsubsidized loans accrue interest while in school
which of the following is not a smart negotiating technique? letting the dealer know how much you like the car, telling the dealer what your bottom line is, sticking to your guns regardless of the facts, attaching yourself to only one car
during a bull market prices go up
you have been offered an opportunity to buy shares of a diversified collection of securities. you will be investing in mutual funds
suppose a person has a healthy insurance policy with a $500 calendar year deductible, a $2000 out-of-pocket cap, and a 80% coinsurance provision. if this person suffers a $600 covered loss, how much will the insurance company pay? $80
given a $250 annual deductible, a $5000 lid on a coinsurance 80/20 coinsurance, and a $250k policy limit, how much of a $27,500 medical bill will be paid by the insured? $5,250
which of the following best describes the personal articles floater? `an endorsement providing coverage for items of expensive personal property not adequately covered under the standard homeowners policy
the deductible on a standard home owners policy applies to coverage on the house, coverage on personal property, and liability coverage
homeowners insurance premiums are determined by policy limits, perils covered, and deductibles chosen
your son left his skateboard at the bottom of the basement stairs. while going downstairs to change a broken lightbulb, you step on the skateboard and break your ankle during the fall .medical damages total $1,455. how much will your $140k homeowners insurance policy pay for this accident? the policy has a $100,000 comprehensive liability coverage and medical payments of $1,000/person $0
which of the following losses is most likely to be covered under your auto liability insurance? a legal bill incurred by your insurer defending you from a claim related to an accident caused by your negligence
your auto liability insurance shows policy limits of $100k/$300k. this means $100k limit per individual with $300k limit per accident
collision protection pays for damage to auto of insured
your car is damaged by fire while parked in your garage. protection would be provided by comprehensive auto coverage
after packing up to return home for the holidays after the fall semester, Tex stopped at Double T bookstore to sell textbooks. after collecting $25, he headed back to his pickup to only find a broken window, the truck broken into, and all his suitcases and personal property gone. the loss of his personal property and suitcases would be covered by personal property off premises (homeowners’ coverage)
auto insurance premiums would be affected by auto body type, auto engine size, business usage, and commuting over 50 miles daily.
if you have an outstanding loan on your car, the contract will require you to carry ___ insurance collision and comprehensive insurance
Categories
Finance Flashcards

Finance chapter 10

The goal of the capital budgeting decisions is to select capital projects that will decrease the value of the firm.(True/False) False
When two projects have cash flows that are tied to each other, the projects may be classified as independent.(True/False) False
When two projects are independent, accepting one project implicitly eliminates the other.(True/False) False
When two projects are mutually exclusive, accepting one project implicitly eliminates the other.(True/False) True
The net present value technique is an approach that goes against the goal of shareholder wealth maximization.(True/False) False
The NPV method determines how much the present value of cash inflows exceeds the present value of costs.(True/False) True
The payback method is consistent with the goal of shareholder wealth maximization.(True/False) False
The discounted payback period calculation calls for the future cash flows to be discounted by a firm’s cost of capital.(True/False) True
The accounting rate of return is not a true return because it simply utilizes some average figures from a firm’s balance sheet and income statement.(True/False) True
The decision criterion for the accounting rate of return is consistent with the goal of shareholder wealth maximization.(True/False) False
The IRR and NPV decisions are consistent with each other when a project’s cash flows follow a conventional pattern.(True/False) True
Unconventional cash flow patterns could lead to conflicting decisions by NPV and IRR.(True/False) True
When mutually exclusive projects are considered, both NPV and IRR will always produce the same acceptance decision.(True/False) False
When evaluating two projects that require different outlays, the IRR does not recognize the difference in the size of the investments.(True/False) True
What is true of an independent project? cash flows are unrelated.
Two projects are considered to be mutually exclusive if both selecting one would automatically eliminate accepting the other and the projects perform the same function.
The cost of capital is minimum return that a capital project must earn to be accepted
Capital rationing implies that a firm has constraint to fund all of the available projects.
Advantage of the payback method Both the technique is simple for managers to compute and interpret and it is a good measure of liquidity risk.
disadvantage of the payback method? -It is inconsistent with the goal of maximizing shareholder wealth.-It ignores cash flows beyond the payback period.-It ignores the time value of money.
Which of the following statements about IRR is NOT true? The IRR is the discount rate that makes the NPV greater than zero.
The internal rate of return is discount rate that makes the NPV equal to zero.
When evaluating capital projects, the decisions using the NPV method and the IRR method will agree if both the projects are independent and the cash flow pattern is conventional.
Which of the following cash flow patterns is NOT an unconventional cash flow pattern? A negative initial cash flow is followed by positive future cash flows.
Which of the following rates should be used to calculate a project’s net present value? Cost of capital
One of the main reasons why the discounted payback period is not widely used by managers is that: it ignores all cash flows that occur after the arbitrary cutoff period
The IRR is the discount rate that makes the NPV positive(True/False) False*The IRR is the discount rate that makes the NPV equal to zero.
Which of the following capital budgeting techniques, is the most appropriate one for evaluating projects? Net present value
A weakness of the accounting rate of return technique is, it: does not distinguish between revenue and cash flows.
The IRR and NPV methods always rank projects in the same order.(True/False) False*The IRR and NPV methods can give conflicting results
If a project’s IRR exceeds its _____, the project should be _____. cost of capital; accepted
The NPV and IRR methods will always agree when you are evaluating _____ projects and the project’s cash flows are _____. independent; conventional
The cost of capital for a project is its return on equity.(True/False) False*The cost of capital is the rate of return that a capital project must earn to be accepted by management.
key disadvantage of the IRR method? With mutually exclusive projects, the IRR method can lead to incorrect investment decisions.
Capital investments large cash outlays, long-term commitments, not easily reversed, and primary factors in a firm’s long-run performance
Capital budgeting techniques help management systematically analyze potential opportunities in order to decide which are worth undertaking
Independent Projects Projects for which the decision to accept or reject is not influenced by decisions about other projects being considered by the firm
Mutually exclusive projects Projects for which the decision to accept one project is simultaneously a decision to reject another project
Contingent projects Projects for which the decision to accept one project depends on acceptance of another project
Basic Capital Budgeting -Capital rationing-Capital Asset-Cost of Capital
Capital rationing firm with limited funds chooses the best projects to undertake
Capital Asset long-term assets
Cost of Capital rate of return that a project must earn to be accepted by management
Net Present Value (NPV) -goal of maximizing shareholder wealth-compares the present value of expected benefits and cash flows from a project to the present value of the expected costs; if the benefits are larger, the project is feasible
Valuation of Real Assets 1.Estimate future cash flows2.Estimate cost of capital/required-rate-of return3.Calculate present value of future cash flows
Practical difficulties in valuing real assets -Cash flow estimates must be prepared in-house and are not as readily available as those for financial assets with legal contracts-Estimating required-rates-of-return for real assets is more difficult than estimating required return for financial assets because no market data is available
Advantages of NPV 3 1.uses discounted cash flow valuation technique to adjust for time value of money.2.Provides direct (dollar) measure of how much a capital project will increase the value of the firm.3.Consistent with the goal of maximizing stockholder value.
Disadvantage of NPV Can be difficult to understand without an accounting and finance backround.
Payback Period -The Payback Period is the amount of time it takes for the sum of the net cash flows from a project to equal the project’s initial investment*Projects with shorter payback periods are more desirable
Negatives about Payback rule There is no economic rationale that makes the payback method consistent with shareholder wealth maximization-It ignores the time value of money-Does not account for differences in the overall risk of projects-Cash flows occurring after the payback period are not considered
ARR Flaws -is not a true rate of return; it is generated from the income statement and balance sheet-It ignores the time value of money-There is no economic rationale that makes it consistent with the goal of maximizing shareholder wealth
What method should be used when dealing with unconventional cash flows, IRR or NPV? NPVBecause,With unconventional cash flows, the IRR technique may provide more than one rate of return. This makes the calculation unreliable and it should not be used to determine whether a project should be accepted or rejected
Advantages of IRR Method 1.Intutive and easy to understand2.Based on discounted cash flow technique
Disadvantages of IRR 1.with non-conventional cash flows, IRR approach can yield no usable answer or multiple answers.2.A lower IRR can be better if a cash inflow is followed by cash outflows3.With mutually exclusive projects, IRR leadto incorrect investment descisions4.IRR calculation assumes cash flows are reinvested at the IRR.
Profitability Index (PI) The PI provides a measure of the value of project generates for each dollar invested in that project
Categories
Finance Flashcards

HEALTHCARE FINANCE QUIZ 4

Which of the following statements about managerial accounting is incorrect?Select one: a. Managerial accounting information is used primarily by managers within the organization. b. Managerial accounting information is prepared in accordance with rules established by outsiders (generally accepted accounting principles [GAAP]). c. Managerial accounting is primarily forward looking, as opposed to focusing on historical information. d. Managerial accounting information is used both at the organizational level and at the sub-unit (department) level. e. Budgets are an important managerial accounting tool. b. Managerial accounting information is prepared in accordance with rules established by outsiders (generally accepted accounting principles [GAAP]).
Which of the below statements about cost allocation is most correct?Select one: a. The direct method is conceptually best and least expensive to implement. b. The reciprocal method is most widely used in practice. c. The reciprocal method is conceptually best but typically the most expensive to implement. d. Both a. and b. above are correct. e. Both b. and c. above are correct. c. The reciprocal method is conceptually best but typically the most expensive to implement.
In general, the best way to allocate costs in a large organization is to assign all overhead expenses to a single cost pool with one cost driver. (T/F) FALSE
The relationship between costs and the volume of services provided is called cost behavior (or underlying cost structure). (T/F) TRUE
Which of the following statements about cost allocation is correct?Select one: a. The direct method of allocation recognizes services provided by support departments to one another. b. A cost driver is any grouping of overhead costs that must be allocated. c. The reciprocal method of allocation represents a compromise between the direct method and the step-down method. d. A cost pool is the total amount of direct costs incurred by one of the patient service departments. e. None of the above statements are correct. e. None of the above statements are correct.
Effective cost drivers should have which of the following characteristics?Select one: a. They should be perceived as being fair. b. They should create an incentive for cost reduction. c. They should create an allocation rate based on patient revenues. d. Both a. and b. above are correct. e. Both a. and c. above are correct. d. Both a. and b. above are correct.
The goal (purpose) of cost allocation is to assign all overhead costs to the activities (departments) that cause the costs to be incurred. (T/F) TRUE
Which of the following statements about activity based costing (ABC) is most correct?Select one: a. It uses a top down approach to cost allocation. b. It is most useful for assigning costs to departments. c. It is most useful for assigning costs to individual services. d. It is easy to apply because it ignores overhead costs. e. It is less costly to implement than traditional costing methods. c. It is most useful for assigning costs to individual services.
In economics, the situation in which average cost (per unit of output) declines as volume increases is known as economies of scope. (T/F) FALSE
Assume that Goodhealth Clinic has fixed costs of $1,000,000 and a total cost forecast of $1,500,000 at a volume of 20,000 patient visits. What is the clinic’s variable cost rate?Select one: a. $25 b. $20 c. $15 d. $10 e. $ 5 a. $25
The Housekeeping Department of Micanopy Hospital has direct costs of $500,000. The hospital’s four patient service departments utilize the following amounts of space:Department A 1,000 square feetDepartment B 2,000 square feetDepartment C 3,000 square feetDepartment D 4,000 square feetAssuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department A?Select one: a. $ 25,000 b. $ 50,000 c. $ 75,000 d. $100,000 e. $125,000 b. $ 50,000
The Housekeeping Department of Marshfield Clinic has direct costs of $1,000,000. The clinic’s four patient service departments utilize the following amounts of space:Department A 5,000 square feetDepartment B 10,000 square feetDepartment C 15,000 square feetDepartment D 20,000 square feetAssuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department B?Select one: a. $500,000 b. $400,000 c. $300,000 d. $200,000 e. $100,000 d. $200,000
Assume that Randal Clinic has fixed costs of $500,000 and a variable cost (per visit) rate of $20. What is the total cost forecast for a volume of 5,000 patient visits?Select one: a. $400,000 b. $500,000 c. $600,000 d. $700,000 e. $800,000 c. $600,000
Assume that Lexington Hospital has fixed costs of $10,000,000 and a variable cost (per inpatient day) rate of $200. What is the total cost forecast for a volume of 50,000 patient days?Select one: a. $12,500,000 b. $15,000,000 c. $17,500,000 d. $20,000,000 e. $25,000,000 d. $20,000,000
Categories
Finance Flashcards

inquizitive chapter 10

Winners of – elections go on to face each other in the – election. primary general
One advantage digital media has over traditional media concerning campaigns is its low cost. true it does
In 2016, – won the electoral college. In that same election, – won the popular vote. Donald Trump Hillary Clinton
Match the frequency of the election cycle to the corresponding election type.presidential congressional presidential – 4 years congressional – 2 years
Relative to campaigns in the nineteenth century, today’s campaigns require – effort by campaign workers and – campaign money. less more
Which of the following statements are correct regarding the stability of party identification? Looking at the electorate as a whole, party identification is stable.Individuals rarely change their party identification.
One of the unexpected twists of the 2016 election was how strong of a challenge Hillary Clinton faced for the Democratic nomination. Her strongest challenge came from which liberal Senator from Vermont? bernie sanders
Ballot initiatives influence political behavior. Which of the following characteristics are correct regarding citizens in states with ballot initiatives? higher levels of turnoutmore knowledge about politics
Since America’s Founding, candidates for president have been nominated using a variety of methods. Put the following nomination methods in order from earliest in American history to the most recent. congressional “King Caucus”delegates chosen by state party leadersdelegates chosen by primaries and caucuses
Match the type of campaign on the left with each campaign characteristic that describes it on the right.grassroots campaign mass media campaign local campaign-grassroots campaignorganizationally driven-grassroots campaignstatewide campaign-mass media campaignmoney-intensive-mass media campaign
In the United States, which levels of government are most responsible for administering elections? city governmentscounty governmentsstate governments
Maria is deciding whether to vote to re-elect a sitting president or to vote for the other party’s challenger. She decides to engage in retrospective voting. As a retrospective voter, she might consider which of the following? how the economy did during the president’s previous term in office
Which of the following set groups such as 527s and 501(c)(4)s apart from more traditional campaign finance groups such as political action committees? These groups are not subject to the spending limits of the Bipartisan Campaign Finance Reform Act.These groups cannot coordinate directly with campaigns.
McCutcheon et al. v. FEC (2014) removed limits on individuals’ campaign contributions
Citizens United v. FEC (2010) government could not restrict independent expenditures by corporations
Buckley v. Valeo (1974) introduced idea that campaign contributions count as speech
When is party identification most likely to influence a person’s vote choice? when that person is voting on state legislative candidateswhen that person is unfamiliar with the issueswhen that person knows little about the candidates
Direct democracy allows voters the opportunity to directly translate their preferences into government policy. Match the following characteristics of direct democracy to their respective form—ballot initiatives or referenda. Ballot Initiatives: Allow citizens to place proposed laws directly on ballotReferenda: State legislatures refers laws to voters for popular vote; present in 50 states
Order the political candidates on their likelihood of attracting campaign donations from interest groups from most likely to least likely. 1. Incumbent members of majority party2. Incumbent member of minority party3. Challenger candidate from majority party4. Challenger candidate from minority party
Which form of electoral system is most common in the United States? plurality system
Which statement best characterizes the relationship between consumer confidence and presidential elections? the incumbent party tends to win when the confidence exceeds 100
Negative campaign ads are more likely to address -, while positive campaign ads tend to focus on -. policy positions personal characteristics
The trend in campaign finance law over time has been toward which the following? fewer restrictions on campaign donations
By participating in as many newsworthy events as possible, such as visiting orphanages or disaster sites, candidates are often attempting to save money by generating so-called __________ media. free media
Categories
Finance Flashcards

BUDGETS AND FINANCE

The relationship between the federal budget and the national economy is reciprocal, because the budget affects the economy and the economy shapes the budget.
Articulated by his book published in 1936, the theory that government can use the budget to steer the economy can be attributed to John Maynard Keynes.
The Congressional Budget Office estimates that between 2009 and 2020 the federal debt owned by the public as a share of the total economy will increase
The ______ proposes the budget and the ______ authorizes expenditures and determines how revenues are obtained. agencies; Congress
By often drafting appropriations acts as narrowly as possible, Congress attempts to reduce the possibility that the president will exercise the authority to impound?
______ revolutionized the federal budget process and increased presidential power. The Budget and Accounting Act
Top-down budgeting differs from bottom-up budgeting in that the former examines the big picture.
Management by objectives and zero-base budgeting are techniques to reform incrementalism.
Prior to 1921, ______ provided the primary leadership during the federal budget process. Congress
Creating a biennial budget and enacting a balanced-budget constitutional amendment were processes implemented to reform the budget process.
Government taxation and spending is called fiscal policy.
The Federal Reserve manages the money supply, a responsibility also known as monetary policy.
The share of the federal budget that Congress and the president can readily change (control) in any given year went from 66 percent in 1965 to ______ percent in 2009. 35%
A congressional ______ commits money for spending, and congressional ___ create programs and place limits on the amount of money that can be spent. appropriation; authorizations
Congress mainly uses legislative controls and ______ to restrain executive discretion. limits on executive impoundment
The classic question of basic budgeting: “On what basis shall it be decided to allocate x dollars to activity A instead of activity B?” can be attributed to whom? V.O. Key
T/F: The Performance Assessment Rating Tool (PART) was developed by George W. Bush. True
T/F: The larger the federal deficit, the more of the federal budget must be devoted simply to paying interest. True
T/F: The Congressional Budget Office is the congressional equivalent to the president’s Office of Management and Budget. True
T/F: The Impoundment Control Act was created to prevent the gross abuse of impoundment authority by President George W. Bush. False
T/F: The flow of money throughout the bureaucracy provides a tool for controlling the implementation of government programs. True
T/F: The federal budget is just like state and local budgets having the same amount of resources to sustain deficits and the same amount of fiscal authority that state and local governments do. False?
Categories
Finance Flashcards

Operations Management Chapter 1

1. Operations managers are responsible for assessing consumer wants and needs and selling and promoting the organization’s goods or services. FALSE Operation managers are not responsible for promoting goods/services.
2. Often, the collective success or failure of companies’ operations functions will impact the ability of a nation to compete with other nations. TRUE A nation is often only as competitive as its companies.
3. Companies are either producing goods or delivering services. This means that only one of the two types of operations management strategies are used. FALSE Most systems involve a blend of goods and services.
4. Operations, marketing, and finance function independently of each other in most organizations. FALSE Operations, marketing and finance are naturally dependent upon one another
5. The greater the degree of customer involvement, the more challenging the design and management of operations. TRUE Greater customer involvement leads to more complexity in the design and management of operations.
6. Goods producing organizations are not involved in service activities. FALSE Most systems involve a blend of goods and services.
7. Service operations require additional inventory because of the unpredictability of consumer demand. FALSE Service operations cannot use inventory as a hedge against unpredictable demand.
8. The value of outputs is measured by the prices customers are willing to pay for goods or services. TRUE Customers’ willingness to pay for goods or services sets the value of these outputs.
9. The use of models will guarantee the best possible decisions. FALSE Models are useful, but their use does not guarantee the best decisions.
10. People who work in the field of operations should have skills that include both knowledge and people skills. TRUE Operations management requires a blend of knowledge and people skills.
11. Assembly lines achieved productivity but at the expense of standard of living. FALSE Productivity and standard of living go hand in hand.
12. The operations manager has primary responsibility for making operations system design decisions, such as system capacity and location of facilities. FALSE The operations manager plays a role in these decisions but is not primarily responsible for them.
13. The word “technology” is used only to refer to “information technology”. FALSE Technology also refers to the technology involved in resource transformations.
14. ‘Value added’ by definition is always a positive number since ‘added’ implies increases. FALSE Some transformations result in the output being worth less than the inputs.
15. Service often requires greater labor content, whereas manufacturing is more capital intensive. TRUE Service operations tend to be more labor-intensive than manufacturing.
16. Measurement of productivity in service is more straightforward than in manufacturing since it is not necessary to take into account the cost of materials. FALSE Materials cost must be considered in services as well.
17. Special-purpose technology is a common way of offering increased customization in manufacturing or services without taking on additional labor costs. FALSE Special-purpose technology typically reduces costs through standardization.
18. One concern in the design of production systems is the degree of standardization. TRUE How standardized outputs will be is a critical consideration in the system design question.
19. Most people encounter operations only in profit-making organizations. FALSE Operations are also relevant to not-for-profit organizations such as the Red Cross.
0. Service involves a much higher degree of customer contact than manufacturing. TRUE Customer contact tends to be much higher in services.
21. A systems approach emphasizes interrelationships among subsystems, but its main theme is that the whole is greater than the sum of its individual parts. TRUE Optimizing the performance of individual subsystems does not guarantee optimal performance from the overall system.
22. The Pareto phenomenon is one of the most important and pervasive concepts that can be applied at all levels of management. TRUE Pareto phenomena can be observed in a wide variety of organization situations.
23. Operations managers, who usually use quantitative approaches, are not really concerned with ethical decision-making. FALSEEthics issues are touching on all areas of management, including operations.
24. The optimal solutions produced by quantitative techniques should always be evaluated in terms of the larger framework. TRUEQuantitative techniques have limitations that must be considered.
25. Managers should most often rely on quantitative techniques for important decisions since quantitative approaches result in more accurate decisions. FALSEJust as other techniques do, quantitative techniques have limitations.
26. Many operations management decisions can be described as tradeoffs. TRUEManaging tradeoffs is the essence of operations management.
27. A systems approach means that we concentrate on efficiency within a subsystem and thereby assure overall efficiency. FALSESubsystem efficiency doesn’t necessarily translate into overall efficiency.
28. Prior to the Industrial Revolution, goods were produced primarily by craftsmen or their apprentices using custom made parts. TRUEAfter the Industrial Revolution, more standardized approaches became common.
29. Elton Mayo’s “Hawthorne Experiment” was the focal point of the Human Relations Movement, which emphasized the importance of the human element in job design. TRUEThe Hawthorne Experiments were the beginning of the Human Relations Movement.
30. Among Ford’s many contributions was the introduction of mass production, using the concept of interchangeable parts and division of labor. TRUEFord made mass production a practical success.
31. Operations management and marketing are the two functional areas that exist to support activities in other functions such as accounting, finance, IT and human resources. FALSEOperations management and marketing are supported by these functions.
32. Lean production systems incorporate the advantages of both mass production and craft production. TRUELean production blends the best of both worlds.
33. As an abstraction of reality, a model is a simplified version of a real phenomenon. TRUEModels are valuable abstractions and simplifications of real, complex phenomena.
34. Lean production systems use a highly skilled work force and flexible equipment. TRUELean depends on a skilled workforce.
35. The lean production philosophy has been slow to be adopted in service industries. FALSELean concepts apply very well in service industries.
36. Operations Management activities will be less important in the future because many firms are becoming service-oriented operations rather than goods producing operations. FALSEOperations management is just as important for service firms.
37. A modern firm has two supply chain considerations – external links with suppliers and customers, and an internal network of flows to and between the operations function itself. TRUESupply chain considerations are at play both in and beyond the modern firm.
38. Operations management involves continuous decision-making; hopefully most decisions made will be: C. informed Informed decisions incorporate all relevant issues.
39. A ‘product package’ consists of: C. a combination of goods and services Most firms are not pure service or manufacturing firms; they produce combinations of goods and services.
40. Business organizations consist of three major functions which, ideally: A. support one another Finance, Marketing and Operations are these major functions.
41. Which of the following is not a type of operations? E. all the above involve operationsAll of these involve taking inputs and transforming them.
42. Technology choices seldom affect: C. union activity. Union activity can affect a firm’s technology choices, but not the other way around.
43. Measurements taken at various points in the transformation process for control purposes are called: D. feedback Feedback is used to monitor and improve processes.
44. Budgeting, analysis of investment proposals, and provision of funds are activities associated with the _______ function. D. finance These are the primary tasks for the finance function.
45. Which one of the following would not generally be classified under the heading of transformation? C. staffing Staffing doesn’t involve transforming resources so much as it involves acquiring them.
46. Manufacturing work sent to other countries is called: B. outsourced Outsourcing is increasingly a part of operations management.
47. Product design and process selection are examples of _______ decisions. C. system design These major decisions affect decisions made at lower levels.
48. The responsibilities of the operations manager are: B. planning, organizing, staffing, directing, and controlling The scope of operations management ranges across the organization.
49. Knowledge skills usually don’t include: C. communication skills Communication skills generally are considered to be people skills.
50. Which of the following is not true about systems approach? C. A systems approach concentrates on efficiency within subsystems. Subsystem efficiency doesn’t necessarily translate into overall system efficiency.
51. What is credited with gains in industrial productivity, increased standards of living and affordable products? D. assembly lines Mass production has played a prominent role in increasing standards of living.
52. Production systems with customized outputs typically have relatively: E. skilled workersSkilled workers are necessary to accommodate the variation inherent in customized outputs.
53. Which is not a significant difference between manufacturing and service operations? A. cost per unit Manufacturing operations aren’t necessarily more or less efficient than service operations.
54. Which of the following is not a characteristic of service operations? D. easy measurement of productivity The productivity of service operations is often hard to measure.
55. Which of the following is a recent trend in business? C. supply chain management Supply chain management involves a broader systemic view of operations.
56. Farming is an example of: C. non-manufactured goods Farm operations are not manufacturing operations.
57. Dealing with the fact that certain aspects of any management situation are more important than others is called: C. recognition of priorities Solutions tend to be targeted toward higher priority aspects of a situation.
58. The fact that a few improvements in a few key areas of operations will have more impact than many improvements in many other areas is consistent with the: B. Pareto phenomenon Pareto phenomena direct our attention to the difference between the “important few” and the “trivial many.”
59. The process of comparing outputs to previously established standards to determine if corrective action is needed is called: C. controlling Controls are used to maintain performance.
60. Which of the following does not relate to system design? C. inventory management Inventory management is a system operation decision area.
61. Taking a systems viewpoint with regard to operations in today’s environment increasingly leads decision-makers to consider ______________ in response to the ___________. C. sustainability; threat of global warming Sustainability is a relatively recent operations management consideration.
62. Some companies attempt to maximize the revenue they receive from fixed operating capacity by influencing demands through price manipulation. This is an example of __________________: D. Revenue management Revenue management is used to ensure that as much perishable capacity as possible is sold.
63. Which of the following is not an ongoing trend in manufacturing? D. mass production for greater economies of scale Manufacturers are moving away from mass production for economies of scale.
64. Which of the following is not a benefit of using models in decision making? D. All of the above are benefits. Models are useful tools for making decisions without confronting the actual situation with all of its complexity.
65. Modern firms increasingly rely on other firms to supply goods and services instead of doing these tasks themselves. This increased level of _____________ is leading to increased emphasis on ____________ management. A. outsourcing; supply chain Supply chain management takes a more systemic view of the firm, its operations, and its suppliers.
66. Operations and sales are the two ________ functions in businesses. E. line Others are support functions.
67. Marketing depends on operations for information regarding ___________. B. lead time Marketing uses lead time information to make promises to customers.
68. Two widely used metrics of variation are the __________ and the _________. The mean and standard deviation summarize important facets regarding the variation in a process.. mean; standard deviation
69. Which of the following statements about variation is FALSE? D. Any variation makes a production process less productive. The choice to offer customers greater variety might increase variation but increase productivity even more.
70. Which of the following is essential to consider with respect to managing a process to meet demand? A. strategy B. demand forecasts C. capacity D. random variability E. all of the above All of these play a role in determining whether a process can meet demand.
Categories
Finance Flashcards

National Finance

An “Acceleration” clause most nearly means to speed up payment of an overdue debt.
The term, PITI refers to the parts of a mortgage loan payment, which of the following correctly describes PITI, Principal, Interest, Taxes, and Insurance.
When a mortgage is paid off, what clause allows the lender to release the mortgage rights and issue a satisfaction piece? Defeasance
If prioritizing loans as when recording, a second mortgage or deed of trust is referred to as a junior mortgage.
Typically, a mortgage loan monthly payment consists of PITI, (P) the amount borrowed from the lender is called the principal.
Of the following parties to a mortgage, whose interest is benefitted by an acceleration clause? The mortgagee
An agreement to waive prior rights in favor of another is called subordination.
Which is true about a promissory note? It is the primary evidence of a loan
A buyer assumes the mortgage. How is the seller relieved of the liability? Novation
A mortgage clause used in refinancing the first mortgage which allows the second mortgage to take the first place is called subordination.
Foreclosure would terminate which of the following? Equitable redemption rights
Ronald defaulted on his home mortgage loan payments; therefore, the lender obtained a court order to foreclose on the property. At the foreclosure sale, Ronald’s house sold for only $29,000 and the unpaid balance of his loan is $40,000. What must the lender do to recover the $11,000 Ronald still owes? Seek a deficiency judgment
If the amount realized at a Sheriff’s sale upon a delinquent mortgage is more than the indebtedness, the excess belongs to the mortgagor.
Which would be first in priority? Special Assessments
The buyer was required to pay $4,000 in discount points. The loan balance was $80,000. How many points did the lender require? 5
A lender charges discount points on a loan to improve the lender’s yield.
If a borrower purchases a property for $200,000, and borrows $160,000 he/she is said to have a LTV ratio of? 80%
The interest on a real estate mortgage loan is what type of interest? Simple
The loan amount is $70,000, and the monthly principal and interest payment will be $479.00 a month for 30 years. How much interest will be paid over the term of the loan? $102,440.00
A buyer got a 30 year loan with a loan balance of $65,000 with an interest rate of 10% and a factor of 8.78. What will be the borrowers monthly P & I payment? $570.70
Remember for purposes of determining the new loan balance, you will not have to know how to determine the payment amount.
In Step 3 what do you subtract from the monthly payment amount to solve for the monthly principal? Current monthly interest
Determine the monthly interest on a loan with a balance of $168,300, a monthly payment of $1,356.80, and an interest rate of 7.75%? $1,086.94.
A homeowner has a mortgage balance of $149,570.75. If the interest rate on the loan is 9.5% and the monthly payment is $1,303.55 what will be the mortgage balance after the next two payments? $149,330.91
A mortgage has a balance of $70,000 at 11.5% interest for a period of 25 years. The monthly P & I payment is $711.53, what is the interest charge for the second monthly payment? $670.44
What is the balance on an amortized loan of $340,000 after the first payment if the interest rate is 6% with a monthly P&I payment of $2,028? $339,672.00
A type of long term permanent financing for residential construction or large construction projects, that replaces the construction loan is called a (an) takeout loan.
A type of loan where interest and principal are paid on an equal basis until the final payment, which is larger, is called a Balloon Loan or partially amortized loan.
A type of mortgage which allows the lender to increase the outstanding balance of a loan up to the original amount of the loan in order to advance additional funds is called an open-end mortgage.
An Adjustable Rate Mortgage (ARM) contains an escalator clause that allows the interest to adjust over the loan term. How often the loan rate may be changed is determined by the adjustment period.
The purchaser of real estate by deed or the buyer under a contract for deed is called the vendee.
With an Adjustable-rate Loan the interest rate fluctuates and is usually tied to an index. The interest rate for any given period is the indexed rate plus the margin amount.
A loan on real estate, that includes fixtures, and appliances used extensively in the sale of condominiums is a (an) package mortgage.
A real estate loan where a homeowner receives monthly payments based on accumulated equity rather than a lump sum and is repaid upon the death of the owner or sale of the property is a (an) reverse annuity mortgage.
A final payment of a mortgage loan that is considerably larger than the other monthly payments because the loan was not fully amortized is called a balloon payment.
A type of payment plan where a buyer pays interest only and the final payment is principal at the end of the loan period. Straight
A mortgage requires monthly payments of $852.10 for 15 years and a final payment of $29,800. This type of loan is called a (an) balloon or a partially amortized loan.
When a real estate loan uses both real and personal property as collateral for the loan it is called a (an) package mortgage.
A Budget Mortgage is a loan, which has a payment composed of the following? Principal, interest, taxes and insurance
A developer would most likely obtain which of the following types of mortgage on a new subdivision? Blanket mortgage
What can the VA require a veteran do when obtaining a loan? Make the veteran automatically assume liability for the loan
If a Veteran wanted to buy a $60,000 house in a city with a population of 100,000 people, which of the following loans could he NOT apply for? RECD loan
The basic difference between an FHA and a VA loan is The FHA insures loans, the VA guarantees them.
A veteran desired a loan to buy a 200 acre residence. There are no VA lenders in the area. Which could happen? The VA could loan the money themselves.
Conventional mortgage loans are not guaranteed or insured by any government agency.
For a veteran to obtain a VA loan, the VA must issue a certificate of eligibility
When you obtain an FHA loan, what generally happens? An FHA appraiser must appraise the property
Private mortgage insurance is associated with conventional loans.
Rural Economic and Community Development (RECD) loans are either made directly by RECD or made by a private lender with RECD guaranteeing a certain percentage.
A veteran had a VA loan using his full entitlement. He allows another veteran to assume the loan without VA approval. Could he immediately get another VA loan? No, because he is still liable for the loan.
On a government backed loan, which of the following would be permitted concerning pre-payment penalties? Prepayment penalties are not allowed, under any circumstances, on VA or FHA loans.
What is the purpose of FHA? To act as an insurance company of first mortgages
A Buyer has demonstrated the financial capacity and creditworthiness required to afford the asking price by providing the lender with all of the following, except an appraisal equal to or higher than the contract price.
Transfer taxes are generally paid by the seller.
Protection to an owner of property against losses sustained as a result of a defective title to real estate can be accomplished by title Insurance.
Many states charge what is called a transfer tax when the property is conveyed by one of the following means deed.
When underwriting a mortgage loan a lender considers all of the following, except credit worthiness of the seller.
The recorded history of matters that affect the title to a specific parcel of real estate, such as ownership, encumbrances and liens, usually beginning with the original recorded source of the title is called the chain of title.
Under which of the following would one MOST likely see an estoppel certificate? A lender sells a loan and the new mortgagee wants to know the existing balance
Prior to closing, a final walkthrough of the property should be performed to ensure that everything has remained as stated in the sales contract. The walkthrough is generally completed by the buyer.
Assets include all of the following, except revolving and installment loan accounts.
A settlement agent could be all of the above.
A qualified buyer is one who has demonstrated the financial capacity and credit worthiness required to afford the asking price. In qualifying a buyer the lender looks at these factors? Income, net worth and credit history
Settlement is another name for closing and brings the real estate transaction to completion.
A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms is a conditional approval.
The legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence is known as estoppel.
Which of the following is considered a part of the secondary mortgage market? Federal Home Loan Mortgage Corporation (FHLMC)
All of the following were originally established to buy and sell mortgages in order to stimulate mortgage lending, except Maggie Mae (MGIC).
An increase in the availability of money would lead to which effects? Interest rates would go down
A mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return is called participation financing.
A commercial bank would usually make all of the following loans EXCEPT, a pension fund loan.
All of the following are sources for obtaining a residential mortgage for the purchase of a single-family residence, except FNMA.
S&Ls are now regulated by the Federal Housing Finance Board (FHFB) and deposits are insured by the Deposit Insurance Fund for at least $250,000.
As a group, the three secondary mortgage market participants; Fannie Mae, Ginnie Mae and Freddie Mac provide an outlet for primary lenders to sell their mortgage loans.
The two biggest money lenders of residential real estate mortgages are savings and loans and banks.
The Federal Reserve controls lenders by telling lenders what percentage of their assets they can loan.
The primary distinction/s between the primary and secondary mortgage market is?
All of the following purchase mortgages from savings and loans in the secondary market EXCEPT the Federal Housing Administration.
The Federal Reserve controls the money supply by requiring how much of a bank’s assets have to be on reserve.
Which of the following secondary market organizations is a quasi-government corporation? Fannie Mae (FNMA)
The Federal National Mortgage Association (FNMA) sells seasoned mortgages and deeds of trust to individual investors and financial institutions. A seasoned mortgage is one that has been in existence for some time and has a good record of repayment by the mortgagor.
The Truth in Lending laws apply to the financing of single family residences.
Real estate can be a poor investment if the investor needs ready cash.
Which agency administers RESPA? Consumer Financial Protection Bureau (CFPB)
In terms of stating mortgage rate interest, the standardized rate required by the Truth in Lending Act to facilitate comparison loan shopping is called the annual percentage rate.
Purchasing an investment property , like an apartment complex may be more rewarding if the investor has the required management skills.
The Equal Credit Opportunity Act prohibits lenders from discriminating against consumers in the granting of credit based on the following protected classes; race, color, religion, national origin, sex, marital status, age or dependency on public assistance.
A settlement agent must provide the seller with the Closing Disclosure at consummation of the mortgage.
A standardized yardstick expressing the true annual cost of borrowing is expressed as the “APR” and includes the contract interest rate and points.
Regulation Z is not concerned with the loan to value ratio
An advantage of real estate investment is tax savings, the capital gain exclusion on a principal residence excludes the gain up to $250,000 per individual (up to $500,000 for a couple).
Which of the following mortgage closing transactions require compliance under TRID rules? Unimproved property
Truth In Lending applies to all of the following, except commercial property.
As with most investments, there is a high degree of risk in buying and selling investment real estate because market conditions are changing all the time.
Under the ECOA, a lender can base lending decisions on all of an individual’s information, except marital status.
Real estate is generally a good investment because it keeps up with inflation trends.
The two major sections of the Truth In Lending law, includes advertising and Annual Percentage Rate (A.P.R.).
RESPA requires lenders to provide a HUD “Guide to Settlement” booklet and a Good Faith Estimate (GFE) of all costs related to settlement to borrowers within 3 days of loan application.
A primary purpose of the Truth in Lending Act is to make loan cost information readily available to consumer borrowers.
The Truth-in-Lending Act applies to which of the following? An advertisement for a house for sale by a broker which discloses financing terms.
The Real Estate Settlement Procedures Act and Regulation Z are separate acts dealing with separate financing issues.
The following real estate financing statements all contain trigger terms under Regulation Z of the Truth in Lending Act, except “Great assumable low interest rate loan”.
Which of the following laws require(s) that finance charges be stated as an annual percentage rate (APR)? Truth in Lending Act, Regulation Z
Under the ECOA, a lender can base lending decisions on all of an individual’s information, except sex.
Unsophisticated investors should seek legal council
A mortgage broker _____________???? is a lender.
A buyer wanted to use a promissory note for consideration on the purchase of a property. Can he do this Yes, this is acceptable as long as the seller agrees.
A borrower bought a $74,000 house with no down payment. The loan was probably ______________ a VA loan.
In most states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is this right called Statutory right of redemption
Effective October 1, 2015, the real estate industry has new requirements as specified in the TILA/RESPA Integrated Disclosure (TRID) Rule.
Under an FHA graduated payment mortgage, which of the following fluctuates over the term of the loan Monthly payments
RESPA would prohibit which of the following acts???? Kickbacks
On an 8% straight term loan of $6,071 the borrower paid total interest of $1,700. How long did he have the loan 42
A standardized yardstick expressing the true annual cost of borrowing is expressed as a/an APR
All of the following are true of conventional loans except what? disclose the true costs of obtaining credit.
The primary purpose of Truth in Lending is to _____________ control interest rates on behalf of the consumer.
In which of the following markets may a lender sell a loan that a mortgage banker has previously originated? Secondary market
An owner was selling his own home. Can he advertise the down payment Yes, because it was his own home
Which of the following is considered a conventional loan? Commercial bank ARM loan
An increase in the availability of money would lead to which effect? Interest rates would go down.
If advertised alone, which would be in violation of TRUTH IN LENDING?????? “No down payment required”
A VA loan may be granted for the purchase of a one-family to four-family if the veteran agrees to live there
If a single parent is applying for a real estate loan, when would the fact have to be revealed that part of the parent’s income is from child support? If the parent was relying on the income for repayment of the loan
The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT: Loan fees charged by the lender
Which of the following would usually occur in a sale-and-leaseback transaction? The property is sold on the condition that the new owner lease it back to the seller at the time title passes.
Who is NOT an originator of primary loans? FHA
A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called: warehousing
An impound or reserve account MOST benefits whom? the lender
The Loan Estimate must be delivered to an applicant within three business days of loan application.
An owner advertised “beautiful acreage only $5,000 down, owner will personally finance down payment.” Would this be in violation of the Truth in Lending Act? No, owners are not covered by Reg. Z.
Which of the following describes a mortgage that requires principal and interest payments at regular intervals and calls for the liquidation of the debt by periodic installments until the debt is satisfied? Amortized loan
is the cost per thousand that is required to create the principal and interest payment necessary to pay off a loan. a point
The lender is not insured or guaranteed against a loss, by reason of the borrower’s default in repayment, under which type of loan? conventional
Who is the largest purchaser in the secondary market? Fannie Mae
A home improvement company was negotiating with a home owner to add two rooms onto a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan? friday, midnight
Why would a mortgagee (beneficiary) have an appraisal on the property? To assure the property value is sufficient to cover the loan
Under Regulation Z, consummation is defined as the time when a consumer becomes contractually obligated on a credit transaction.
A buyer wants to take out an FHA loan. The broker should refer the buyer directly to any approved lending institution such as a bank or savings and loan association.
When the lender under a deed of trust required title insurance, who would be the most likely person to pay for it? The trustor
A buyer assumes the mortgage. How is the owner relieved of the liability? novation
The Smiths’ purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller’s existing mortgage, which had a current balance of $23,000. The Smiths’ financed the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a purchase mortgage
In a repayment of a mortgage loan, which type of interest is used? simple
The seller under a land contract is called vendee
When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment is called: balloon payment
The clause in a trust deed or mortgage which permits the mortgagee to declare the entire unpaid sum due upon a default by a mortgagor is called a(n) acceleration clause.
In an installment land contract, what type of title did the seller retain? legal
Which transaction requires a securities’ license? selling shares in fannie mae
Usury MOST nearly means illegal interest
The maximum permissible “loan to value ratios” are based on sale price or appraised value, whichever is lower.