Question 1

Dick and Jane (and their dog Spot)have just purchased a house and are calculating how much money they will need when the closing day rolls around.The purchase price is $200,000.They will make a 20% down payment,and they must pay 2 points on the loan.Closing costs should be 3% of the purchase price.What is the total dollar amount they will need at closing?

Accepted Answer

The answer of Dick and Jane (and their dog Spot)have...

Question 2

Leslie has been offered the choice of either a $1,000 rebate or a 5.5%,48-month loan for the new car she is purchasing.If Leslie will be financing $15,000 and she can get a 7.5%,48-month loan at her credit union,should she take the $1,000 rebate or the 5.5% loan?

Accepted Answer

The answer of Leslie has been offered the choice of...

Question 3

Judy has $2,000 for a down payment on a vehicle and she can afford monthly payments of $400.She wants to finance a vehicle over no more than 4 years.If lenders are currently offering 6 percent interest on 5-year loans,what is the maximum price Judy can pay for a vehicle?

Accepted Answer

The answer of Judy has $2,000 for a down payment...

Question 4

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-A decrease in the "rent ratio" indicates that housing is relatively [more | less] affordable than renting.

Accepted Answer

A decrease in the "rent ratio" indicates that housing is relatively more affordable than renting because the rent ratio compares the cost of owning a home to the cost of renting. A lower ratio suggests that buying is becoming cheaper relative to renting.

Question 5

Patrick would like to know the monthly payments and the total finance charges on the following 2 loans:

Accepted Answer

The answer of Patrick would like to know the monthly...

Question 6

Billy and Suzie want to calculate the difference in monthly payments on a $110,000 home as a result of a $5,000 down payment or a $10,000 down payment.Use your financial calculator to figure the monthly payments,assuming they get a 6.5%,30-year mortgage.

Accepted Answer

The answer of Billy and Suzie want to calculate the...

Question 7

Greg has negotiated a $20,000 price on a new pick-up truck.The manufacturer is offering a $1,500 rebate or 3.9 %,three-year financing.Greg is also able to get 7 %,three-year financing at his credit union.If Greg plans to finance $18,000 over three years,should he take the rebate or the 3.9 % financing?

Accepted Answer

The answer of Greg has negotiated a $20,000 price on...

Question 8

If a lender requires that mortgage payments cannot exceed 30% of gross income and total loan payments cannot exceed 38% of gross income,calculate the monthly payment for which a person with the following financial data could qualify.

Accepted Answer

The answer of If a lender requires that mortgage payments...

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Shorter term auto loans offer the benefit of [lower payments | lower interest rate]

Accepted Answer

Shorter term auto loans typically have a lower interest rate, which can save you money over the life of the loan. While lower payments may seem appealing, they often come with a longer loan term, which can result in paying more in interest overall.

Question 10

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Homeowners may be able to deduct from their taxable income [mortgage principal | mortgage interest]

Accepted Answer

Homeowners can deduct mortgage interest from their taxable income, but not mortgage principal.

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The 11^th District Cost of Funds index is much [more | less] volatile than LIBOR and CD-based indexes.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 12

Your mortgage payment is $1,500 per month.Of this amount,insurance is $50,property taxes are $200,and interest is about $1,100.Assuming you have other itemized deductions that already exceed your standard deduction and that you are in the 31% marginal tax bracket,what is the reduction in your tax liability as a result of owning a home with this mortgage.

Accepted Answer

The answer of Your mortgage payment is $1,500 per month.Of...

Question 13

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-As home prices have fallen the "rent ratio" has [increased | decreased].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 14

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Paying mortgage points to get a lower rate of interest makes more sense if you expect to live in a home for a [longer | shorter] period of time.

Accepted Answer

Paying mortgage points may lower the interest rate, but it also requires an upfront cost. This cost can take years to break even with the savings from a lower interest rate. Therefore, it makes more sense to pay mortgage points if you plan on staying in the home for a longer period of time, as you will have more time to save money on your monthly mortgage payments.

Question 15

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The Real Estate Settlement Procedures Act governs [mortgage regulations | mortgage closings].

Accepted Answer

The Real Estate Settlement Procedures Act (RESPA) governs mortgage closings, not general mortgage regulations. RESPA requires that certain disclosures be made to home buyers before closing, and it regulates the fees that can be charged during the closing process.

Question 16

Janice wants to buy a new car.The cost is $30,000.At the end of six years,the car is expected to be worth 20% of the original price.

Accepted Answer

The answer of Janice wants to buy a new car.The...

Question 17

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-A convertible ARM will have a [higher | lower] interest rate than a traditional ARM.

Accepted Answer

A convertible ARM will have a higher interest rate than a traditional ARM because it offers the added benefit of being able to convert to a fixed-rate mortgage at a later time, which is a valuable option for borrowers.

Question 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-For most homeowners,the most important financial reason for owning a home is for the [inflation hedge | tax shelter].

Accepted Answer

While owning a home can potentially provide both an inflation hedge and a tax shelter, the majority of homeowners consider the tax benefits to be the most important reason for owning a home. The ability to deduct mortgage interest and property taxes on one's income taxes can result in significant savings, making owning a home a valuable tax shelter.

Question 19

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Longer term auto loans have a [lower rate but higher payment | higher rate but lower payment]

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 20

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The [longer | shorter] the period of time you expect to live in a house,the more likely refinancing is a sound financial decision.

Accepted Answer

If you expect to live in a house for a longer period of time, it is more likely that the savings from refinancing will outweigh the costs.

Quiz 5: Making Automobile and Housing Decisions

Leslie has been offered the choice of either a $1,000 rebate or a 5.5%,48-month loan for the new car she is purchasing.If Leslie will be financing $15,000 and she can get a 7.5%,48-month loan at her credit union,should she take the $1,000 rebate or the 5.5% loan?

Judy has $2,000 for a down payment on a vehicle and she can afford monthly payments of $400.She wants to finance a vehicle over no more than 4 years.If lenders are currently offering 6 percent interest on 5-year loans,what is the maximum price Judy can pay for a vehicle?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -A decrease in the "rent ratio" indicates that housing is relatively [more | less] affordable than renting.

Patrick would like to know the monthly payments and the total finance charges on the following 2 loans:

Billy and Suzie want to calculate the difference in monthly payments on a $110,000 home as a result of a $5,000 down payment or a $10,000 down payment.Use your financial calculator to figure the monthly payments,assuming they get a 6.5%,30-year mortgage.

If a lender requires that mortgage payments cannot exceed 30% of gross income and total loan payments cannot exceed 38% of gross income,calculate the monthly payment for which a person with the following financial data could qualify.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Shorter term auto loans offer the benefit of [lower payments | lower interest rate]

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Homeowners may be able to deduct from their taxable income [mortgage principal | mortgage interest]

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The 11th District Cost of Funds index is much [more | less] volatile than LIBOR and CD-based indexes.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -As home prices have fallen the "rent ratio" has [increased | decreased].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Paying mortgage points to get a lower rate of interest makes more sense if you expect to live in a home for a [longer | shorter] period of time.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The Real Estate Settlement Procedures Act governs [mortgage regulations | mortgage closings].

Janice wants to buy a new car.The cost is $30,000.At the end of six years,the car is expected to be worth 20% of the original price.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -A convertible ARM will have a [higher | lower] interest rate than a traditional ARM.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -For most homeowners,the most important financial reason for owning a home is for the [inflation hedge | tax shelter].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Longer term auto loans have a [lower rate but higher payment | higher rate but lower payment]

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The [longer | shorter] the period of time you expect to live in a house,the more likely refinancing is a sound financial decision.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The 11^th District Cost of Funds index is much [more | less] volatile than LIBOR and CD-based indexes.