FP100T Week 3 Weekly Exam

Question 1
What is the function of the Consumer Financial Protection Bureau?

It insures the money consumers have placed in large banks.
It protects consumers from unfair or illegal lending.
It sets the maximum interest rates that can be charged on credit cards.
It establishes standard contracts for home equity loans.

Question 2
The legal document that specifies the terms and conditions of a consumer loan is the

judgement
lien
promissory note
trust agreement

Question 3
When real property is used as collateral to secure a loan, the lender records a __________ against the property.

mortgage
deed
lien
judgement

Question 4
Which of the following is not one of the situations that can defer student loan payments?

Peace Corps service
Postsecondary study
Change in citizenship
Economic hardship

Question 5
Payday lenders are controversial because they

are in competition with traditional lenders.
charge very high rates of interest.
allow people cash their paychecks even when they do not have a bank account.
make it easier for undocumented workers to stay in the job market.

Question 6
When you know that you cannot meet your debt obligations, you should

contact your creditors directly to explain the situation.
use alternative lenders such as payday lenders.
declare bankruptcy as soon as possible.
not contact your creditors because it will adversely affect your credit report.

Question 7
Negative credit information, with the exception of bankruptcies, must be removed from a credit report after __________ years.

10
5
3
7

Question 8
For borrowers who carry a balance on their credit cards, which of the following methods essentially gives the consumer free credit from the date of purchase until the beginning of the next billing cycle?

Two-cycle average daily period
Previous balance method
Average daily balance method without a grace period
Average daily balance method with a grace period

Question 9
In assessing a person's creditworthiness using the Five Cs of Credit, which of the following is applicable in the category of "capacity"?

the amount of other debt the applicant already owes
the credit score of the person applying for credit
the income of the person applying for credit
the value of the asset that will secure the loan

Question 10
Which of the following is the formula for calculating the APR on a credit card?

(Average annual finance charges + Annual fee)/Average loan balance
(Total annual finance charges + Annual fee)/Average loan balance
Average annual finance charges/Average loan balance
(Total annual finance charges – Annual fee)/Average loan balance

Question 11
The grace period is the period of time before

a penalty will be assessed for late payment.
the lender will increase the interest rate on the credit card.
interest begins to accrue on new transactions.
the balance is due in full.
(B or C is correct)

Question 12
The method most commonly used by financial institutions to determine finance charges on consumer loans is the

discount interest method
add-on interest method
compound interest method
simple interest method

Question 13
An interest rate on credit cards that is below the market rate and is offered to new customers is known as a(n) __________ rate.

cash advance
teaser
temporary
balance transfer

Question 14
Janelle is debating whether to buy or lease her favorite car. Under a closed-end lease, Janelle will

be required to compensate the lessor for fluctuations in the resale value of the car at lease end.
not be required to compensate the lessor for fluctuations in the resale value at lease end.
be able to walk away from her lease no matter the condition of the car.
have to purchase the car at lease-end.

Question 15
Which of the following statements is true of adjustable-rate mortgages?

There is no limit as the amount of payment change on an ARM.
The interest rate changes on ARMs are limited per year and per lifetime.
They cannot be converted to fixed-rate loans.
They generally carry higher initial interest rates than conventional mortgages.
(B or C is correct)

Question 16
Among other factors, the price a buyer is willing to pay for a house is a function of

the family size of the buyer and the distance to work.
the marital status of the buyer and years of employment.
mortgage interest rates and the condition of real estate market.
the credit rating of the buyer and the family size.

Question 17
When considering spending on housing needs, if a person is heavily immersed in credit card debt,

credit card debt and housing needs are separate and should not be interlinked.
it would be a good idea to save money by cutting on housing expenditures and paying down credit card debt first.
the person should first satisfy housing needs and then focus on paying down credit card debt.
the individual should continue to borrow against credit cards to maintain a roof over their head.

Question 18
The dealer's invoice price is the price that the dealer

uses as the beginning negotiating price with the buyer.
puts on a car after purchasing it from the manufacturer.
uses when selling the car to a buyer.
pays to purchase a new vehicle from the manufacturer.

Question 19
Compared with a 15-year mortgage at the same rate of interest, a 30-year mortgage will

require payment of a mortgage insurance premium.
result in less interest being paid over the life of the loan.
result in more principal being repaid over the life of the loan.
require a lower monthly payment.

Question 20
If a borrower wants to lower her monthly mortgage payments, she should

negotiate a lower interest rate.
extend the term of the loan.
make a larger down payment.
do all of these.

Question 21
If all else is equal, which of the following is LEAST likely to increase the price of the house you can afford to buy?

increasing mortgage rates
longer mortgage term
improvement in your credit rating
increase in your gross monthly salary

Question 22
Not having a long-term, fixed housing payment ________ a home.

is both an advantage and disadvantage of renting
are advantages of renting
is a disadvantage of owning
are disadvantages of renting

Question 23
In a home purchase, what are discount points?

Interest paid up front by the buyer to the lender in return for a reduced annual interest rate.
Interest paid up front to the lender in return for a reduced monthly mortgage payment.
A reduction in the annual interest rate of the mortgage loan because the buyer made a higher-than-required down payment.
A reduction in the closing costs due to the fact the buyer put up a large amount of earnest money.

Question 24
Generally, a person should consider leasing a car under a closed-end lease contract rather than purchase a new car if

she wants to lower her monthly payments.
she does not want to take the risk of residual value fluctuation.
she does not drive a lot of miles annually.
all of these are true.

Question 25
A lessee is a person who

purchases property from another person, but sells it back after a period of time.
sells property to another person with the intention of purchasing it back after a period of time.
pays money for the privilege of using someone else's property for a period of time.
owns property and charges someone money to use that property for a period of time.