Exam 5: Making Automobile and Housing Decisions

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -A lender gives you a choice of an 80% loan-to-value ratio or a 90% loan-to-value ratio.The interest rate for the 80% loan-to-value ratio loan will typically be [higher | lower] than the 90%.

Mike (age 40)is purchasing his second home for $200,000 with a 25% down payment.He will withdraw some of the down payment from his IRA.He will have to pay ____ on the IRA withdrawal.

Jackie is in the 28% marginal tax bracket and has no other itemized deductions except those related to her home.If her standard deduction is $4,750 and she incurs the following costs related to housing,how much tax savings will she receive as a result of her home purchase?

No-haggling pricing on a vehicle generally ensures buyers pay the lowest price.

Most experts highly recommend service contracts,sometimes called buyer protection plans,for new cars.

According to federal law,private mortgage insurance on most loans currently made ends automatically once the mortgage is paid down to 78% of the original value of the house.

The LIBOR index is one of the most volatile indexes used for adjustable-rate mortgages.

Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months.Based on this information,which of the following housing recommendations would be most appropriate for them?

The interest rate charged on adjustable-rate mortgages will change from time to time based on a specified index.

Most new car warranties cover a minimum of the first 36,000 miles or 3 years of ownership.

Realtors are allowed to collect fees for helping a homebuyer to arrange financing.

____ and ____ are often paid as part of one's house payment and held in an escrow account.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -The choice of the index used with an ARM will make [much | little] difference in the volatility of your payment changes.

An adjustable rate mortgage with a baseline rate of 5%,a margin of 2%,and an annual cap of 1% would have an initial mortgage rate of 7%.

If the maximum loan-to-value ratio that a lender will accept on a $100,000 loan is 80 percent,then the borrower must make a down payment of at least

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -[Lessor | Lessee] is another term for landlord.

Leasing accounts for about ____ percent of all vehicles sold today.

If the manufacturer is offering a rebate on a vehicle,the rebate should be deducted from the dealer's cost when negotiating the price.

Negative amortization is possible with a fixed-rate mortgage.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -As a homeowner,you can deduct the mortgage interest and [property taxes | property insurance] if you itemize on your federal taxes.