BUSA 1131- Exam 1
Terms in this set (56)
The study of personal finance includes
-Financial and career planning
Financial objectives are rarely achieved without restraining
The statistic that measures the value of all goods and services produced in the United States
gross domestic product
Avri, a college teaching assistant, received a raise of $750 from $10,000 to $10,750 this year. If inflation was 2 percent over the same period, which of the following Avri's actual, or real, situation?
Avris increase in income was $750 to $10,750, but inflation declared her real income to $10,536
The economic phase with conditions making it easy for consumers to buy homes, cars, and other goods is called
Which of the following is an example of an unsecured debt?
Signature loan- CORRECT ANSWER
When an unsecured loan is not available, a borrow may offer security in the form of
an excellent credit rating
either collateral or a cosigner- CORRECT ANSWER
Credit card costs can include
If no payment is received by the due date,
-a credit bureau may be notified of slow payment
-the company may begin collection efforts
-the cardholder may be declared in default
Sandy wants to borrow $2,000 for one year and will repay the $2,000 plus the finance charges in one lomp sum at the end of the one-year period. If the lender charges her 14 percent simple interest with no loan fees or other charges, what will the APR on her loan be?
Interest is the price of credit (True/False)
A consumer that has non-mortgage debt repayments of 10 percent or more of annual take-home pay is seriously in debt (True/False)
FICO scores can dictate whether you will be granted credit and at what interest rates. (True/False)
The decision to grant credit is made by a credit bureau (True/False)
Perhaps the greatest disadvantage of credit use is the
loss of financial flexibility in personal money management
A lender can legally discriminate in granting credit based on
What do credit bureaus do?
They collect and provide credit information
Under the concept of _____, lenders may offer lower interest rates to applicants with the highest credit scores while charging steeper rates to more-risky applicants.
Which of the following is the best advice for people who want to start saving?
Pay yourself first
Which would be a good reason not to maintain a savings account for an emergency fund?
-excellent credit history
-none of these; everyone needs an emergency fund-CORRECT ANSWER
-Paid on commission basis
Which of the following is a primary reason many people don't save?
They believe they have no money left over at the end of the month
Certificates of deposit (CDs) tend to pay higher rates of interest than money market accounts
the investor agrees to leave his or her money in the CD for a specified period of time while he or she free access to the funds in a money market account
The best measure of the true cost of credit is the
annual percentage rate of interest
The greatest disadvantage of continues credit use, in the longer term perspective of one's life, is the
loss of financial flexibility to take advantage of opportunities in personal money management
To protect your credit card privacy, which of the following is recommend?
Review your credit bureau report at least once a year
A lender can legally discriminate in granting credit based upon
A borrower with an excellent credit history would be most likely to receive credit with
both higher credit limits and lower interest rates
Positive aspects of using credit include which of the following?
The use of credit card allows you to own and pay as you go on more expensive, longer-term, capital assets sooner in your life.
The ____ the APR, the ____ the true cost of the credit.
The following is a sign of over indebtedness
requesting new credit cards and increases in credit limits
People slip up in building and maintaining good credit when they
create debt requiring them to pay more than 15 percent of their disposable income toward non-mortgage debt.
Credit card costs can include
If you are a person who always pays off the total outstanding balance on your credit card each month, which of the following aspects of the credit card agreement will you be least interested in? (assume, like most credit cards, there is a 25-day grace period)
The interest rate
Mortgage lenders determine the interest rate to charge potential borrowers based upon their
credit rating, or FICO score
Natalie and Christopher have found a home and are planning to apply for a home mortgage loan at heri local bank. What primary criteria must be met for them to be successful?
Their projected home mortgage principal, interest, taxes, and insurance (PITI) to gross income ratio should not exceed 29%, and their payments on all indebtedness to gross income ratio should not exceed 41%
Property taxes are based upon the _____ of the house.
APR stands for
annual percentage rate
Discretionary income is used to pay for things like
Disposable income is income
after all employer withholding, including federal, state, and local taxes.
A net surplus at the end of the month could be
used to pay down credit card debt
invested in a retirement account
carried forward to the next month
Credit bureau files are used to help evaluate to help evaluate applications for
extensions of credit
The U.S. government measures inflation using
the consumer price index
Data on bankruptcy can be included in your credit file for _____ years.
What should you do if you realize that you are overextended, or have excessive debt?
Confirm account balances and payments, re-budget for debt reduction, and seek consolidation or debt re-structure with creditors
-a constitutionally-guaranteed right in the United States
-authorized as liquidation option in Chapter #7; and, a reorganization
of debt option in Chapters #11, 12, and 13
-a petition process in which the Bankruptcy Court determines whether or not a person is able to meet their debts
With a closed-end lease, this is
no charge if the end-of-lease value of the vehicle is lower than the originally projected residual value
Good negotiation technique suggests you never discuss _____ with an auto dealer
maximum affordable monthly payments
What does it mean in auto leasing auto financing when are you are said to be upside down?
You owe more on the car than if is worth
If payments are not received by the exact due date, late charges will usually apply; but, when payments are not received 30 days after the due date, the creditor may
-notify credit bureau of slow payment
-begin collection efforts
-declare default and accelerate maturity on entire balance of debt
The key factor in the development of your FICO score is
payment history (35%)
Credit bureaus compile information from
-commercial banks, credit unions, consumer,and home mortgage lenders
The Thomas family projects a budget deficient of $250 in January and $450 in February with balanced budgets for the rest of the year. Their emergency fund saving account should be funded at a minimum of
$700 min. emergency fund (3-6 months expenses recommended)
The two most useful financial statements are _____ and _____.
cash-flows statements; balance sheets
The formula for calculating net worth
assets minus liabilities
cancelled checks provide a valuable source of information for
An unsecured debt payment to disposable income ratio in excess of _____ percent is likely to be considered problematic by most lenders.