Question 1

Frank purchased his home in 1997 for $130,000.He added an addition costing $35,000.The current tax assessed value is $80,000 while the current market value is $185,000.If Frank's current mortgage balance is $95,000,his equity in his home is

Accepted Answer

A)  $130,000. 
B)  $165,000. 
C)  $90,000. 
D)  $70,000.

Question 2

All of the following are true of a home equity loan except it

Accepted Answer

A)  provides you with a line of credit or a lump sum of money, depending on the type of loan. 
B)  is a good way to combine different kinds of debt. 
C)  may be tax deductible. 
D)  allows you to borrow up to 20% of the market value of your home.

Question 3

If you are considering trading in a used car when you purchase your new one,it is best to

Accepted Answer

A)  tell the dealer right away so that your trade-in credit can be calculated against the purchase of your new car. 
B)  not trade the car in, but rather sell it yourself to someone else. 
C)  make the trade-in deal a separate transaction from the new car deal. 
D)  not be too concerned about the value given, since dealers are required to give you at least blue book value.

Question 4

When borrowing money from a family member or a friend,the loan agreement should be in writing and signed by all parties to avoid any possible misinterpretations.

Accepted Answer

A) True 
 B)False

Question 5

The Truth-in-Lending Act (1969)requires which of the following?

Accepted Answer

A)  Adherence to the interest rates established by the Federal Reserve 
B)  Specifying loan rate standardization 
C)  Disclosure of only interest charges but no other fee 
D)  All of the above

Question 6

You have a home with a market value of $200,000.Your total equity in the home is $40,000.The maximum home equity loan available if the bank will loan 80% based on equity invested is

Accepted Answer

A)  $28,000. 
B)  $32,000. 
C)  $112,000. 
D)  $128,000.

Question 7

If you always drive cars many miles and keep them for 10 years,it would probably be best to

Accepted Answer

A)  lease a new car. 
B)  lease a used car. 
C)  buy a new car. 
D)  buy a used car.

Question 8

When applying for a personal loan,you will be required to fill out a loan application but you will seldom need a personal balance sheet or a personal cash flow statement.

Accepted Answer

A) True 
 B)False

Question 9

You obtain a loan of $3,000 based on simple interest with an annual interest rate of 12%.At the end of the first month,the interest owed on $3,000 is

Accepted Answer

A)  $30. 
B)  $36. 
C)  $300. 
D)  $360.

Question 10

Because the market value of homes may decline,lenders do not like to lend the full amount of the equity when extending a home equity loan.

Accepted Answer

A) True 
 B)False

Question 11

It is important to buy a car that is not over your budget and to finance the car properly.The more money needed to cover the car payments,the less you can add to your savings or other investments.

Accepted Answer

A) True 
 B)False

Question 12

Use the following two columns of items to answer the matching questions below:
-maturity

Accepted Answer

A) a contract that specifies the terms of the loan agreed to by the borrower and lender 
B) disclosure of information including a balance sheet and cash flow statement 
C) life or duration of a loan 
D) loan that is not backed by collateral

Question 13

The method of determining the monthly interest amount by adding the interest and loan principal together and dividing by the number of payments is the

Accepted Answer

A)  simple-interest method. 
B)  annual percentage method. 
C)  simple-interest declining balance method. 
D)  add-on interest method.

Question 14

The personal loan process with a financial institution requires all of the following except

Accepted Answer

A)  filling out an application. 
B)  sitting through an interview. 
C)  negotiating the loan contract. 
D)  negotiating the interest rate.

Question 15

Shopping for automobile insurance should begin immediately after you close the deal on the car.

Accepted Answer

A) True 
 B)False

Question 16

The advantage to financing a car for a long period of time (of up to seven years)is

Accepted Answer

A)  you will build equity in the car faster. 
B)  the car will be worth more by the time you pay off the loan. 
C)  your monthly payment will be lower. 
D)  you will be able to sell the car before you pay off the loan and have money to pocket.

Question 17

Since all student loans are not issued at the same interest rate over the course of a student's education year,once the student graduates and begins working and is starting to pay back the loans they should

Accepted Answer

A)  defer payment as long as possible. 
B)  make only the minimum payments. 
C)  prioritize the loans from highest interest rate to lowest interest rate and use excess cash flow to make additional payments on the high rate loans. 
D)  pay all loans at an equal pace since they all count in your credit score.

Question 18

All of the following are true regarding a cosigner on an account except

Accepted Answer

A)  the cosigner is responsible for any unpaid balance. 
B)  the lender may not seize the assets of the cosigner. 
C)  cosigning an account is a big liability and should be taken seriously. 
D)  cosigning on a loan can restrict the amount that the cosigner is able to borrow.

Question 19

A loan provided to finance the expenses of a person pursuing a college degree is called a(n)________.

Accepted Answer

The answer of A loan provided to finance the expenses...

Question 20

The document that specifies the term of the loan as agreed to by the borrower and lender is called the

Accepted Answer

A)  loan repayment schedule. 
B)  loan contract. 
C)  loan application. 
D)  terms of agreement.

Exam 9: Personal Loans

Frank purchased his home in 1997 for $130,000.He added an addition costing $35,000.The current tax assessed value is $80,000 while the current market value is $185,000.If Frank's current mortgage balance is $95,000,his equity in his home is

All of the following are true of a home equity loan except it

If you are considering trading in a used car when you purchase your new one,it is best to

When borrowing money from a family member or a friend,the loan agreement should be in writing and signed by all parties to avoid any possible misinterpretations.

The Truth-in-Lending Act (1969) requires which of the following?

You have a home with a market value of $200,000.Your total equity in the home is $40,000.The maximum home equity loan available if the bank will loan 80% based on equity invested is

If you always drive cars many miles and keep them for 10 years,it would probably be best to

When applying for a personal loan,you will be required to fill out a loan application but you will seldom need a personal balance sheet or a personal cash flow statement.

You obtain a loan of $3,000 based on simple interest with an annual interest rate of 12%.At the end of the first month,the interest owed on $3,000 is

Because the market value of homes may decline,lenders do not like to lend the full amount of the equity when extending a home equity loan.

It is important to buy a car that is not over your budget and to finance the car properly.The more money needed to cover the car payments,the less you can add to your savings or other investments.

Use the following two columns of items to answer the matching questions below: -maturity

The method of determining the monthly interest amount by adding the interest and loan principal together and dividing by the number of payments is the

The personal loan process with a financial institution requires all of the following except

Shopping for automobile insurance should begin immediately after you close the deal on the car.

The advantage to financing a car for a long period of time (of up to seven years) is

Since all student loans are not issued at the same interest rate over the course of a student's education year,once the student graduates and begins working and is starting to pay back the loans they should

All of the following are true regarding a cosigner on an account except

A loan provided to finance the expenses of a person pursuing a college degree is called a(n)________.

The document that specifies the term of the loan as agreed to by the borrower and lender is called the