FP100T Week 3 Few Questions

Question 6
When the interest on a loan is calculated every period on the outstanding balance, this is known as the _____________ method.
interest-only
discount interest
add-on interest
simple interest

Question 7
Which of the following statements concerning the add-on interest method is true?

The lender subtracts the interest due from the principal before the borrower receives the loan proceeds.
Interest is added to the amount borrowed before the payments are calculated.
It usually results in a higher APR than the discount interest method.
It results in a lower APR than the simple interest method.

Question 9
An interest rate on credit cards that is below the market rate and is offered to new customers is known as a(n) __________ rate.
Teaser
temporary
cash advance
balance transfer

Question 10
A secured loan is a loan that has a(n)
pledge of collateral
cosigner
minimum monthly payment
acceleration clause

Question 11
The method most commonly used by financial institutions to determine finance charges on consumer loans is the
add-on interest method
discount interest method
simple interest method
compound interest method

Question 14
A closed-end lease is a lease in which the
terms of the lease contract are nonnegotiable by the lessee.
terms of the lease contract are nonnegotiable by the lessor or lessee.
lessee takes the risk that the resale value of the car at the end of the term will be less than what was originally assumed.
lessor takes the risk that the resale value of the car at the end of the term will be less than what was originally estimated.

Question 15
Mortgage insurance premiums are usually imposed if the loan-to-value ratio is more than
80 percent.
90 percent.
50 percent.
75 percent.

Question 16
Which of the following is an example of a fixed cost of automobile ownership?
gasoline
maintenance
loan or lease payment
registration

Question 17
Janelle is debating whether to buy or lease her favorite car. Under a closed-end lease, Janelle will

be able to walk away from her lease no matter the condition of the car.
have to purchase the car at lease-end.
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.

Question 18
Borrowers sometimes pay points to their mortgage lender in order to
reduce the interest rate.
reduce the term of the loan.
reduce the principal balance of the loan.
cover their closing costs.

Question 19
A home in a good location will generally
be easier to sell.
appreciate faster in value.
have all of these benefits.
sell for more.

Question 22
When considering spending on housing needs, if a person is heavily immersed in credit card debt,
the individual should continue to borrow against credit cards to maintain a roof over their head.
the person should first satisfy housing needs and then focus on paying down credit card debt.
it would be a good idea to save money by cutting on housing expenditures and paying down credit card debt first.
credit card debt and housing needs are separate and should not be interlinked.

Question 24
If you must pay a fee at the end of the lease term if you choose not to purchase the vehicle, this is known as a:
disposition fee.
capitalized cost reduction.
purchase fee.
back-end fee.

Question 25
Which of the following is a mortgage loan that has a fixed rate, a fixed term, and fixed payments?
conventional mortgage
reverse annuity mortgage
growing equity mortgage
ARM