Question 1

Fannie Mae and Freddie Mac:

Accepted Answer

Fannie Mae and Freddie Mac are government-sponsored organizations, but they are not authorized to revoke loans or set lending limits. They were created to provide liquidity in the housing market by buying mortgages from lenders and either holding them or packaging them into securities and selling them to investors. They are also publicly traded on the stock market.

Question 2

The bank rate measures the percentage of disposable income devoted to savings.

Accepted Answer

The bank rate is the rate at which the central bank lends money to commercial banks, it does not measure the percentage of disposable income devoted to savings.

Question 3

If your personal savings rate is negative it means that you:

Accepted Answer

A negative personal savings rate means that you have spent more money than you have earned and also removed cash from your savings during the given period.

Question 4

Fraudulent mortgage applications increased by 300 percent between 2002 and 2006.

Accepted Answer

According to a report by the FBI, fraudulent mortgage applications increased by 300 percent between 2002 and 2006.

Question 5

Outline the three steps in the financial planning process.

Accepted Answer

The answer of Outline the three steps in the financial...

Question 6

Examples of personal liabilities include the following except_______.

Accepted Answer

Tuition is considered an educational expense rather than a personal liability. Personal liabilities typically include debts or obligations like credit card balances, student loans, and home mortgages.

Question 7

Patricia Greene has just set some short-term goals. These goals should be all of the following except _____.

Accepted Answer

Short-term goals should be realistic and measurable, with a definite time frame. However, they should not be very difficult to achieve as this could lead to frustration and lack of motivation.

Question 8

Subprime loans were made to borrowers who don't qualify for marketset interest rates because of their age, gender or marital status.

Accepted Answer

Subprime loans were made to borrowers who did not qualify for prime market interest rates due to factors such as low credit score or high debt-to-income ratio, not because of their age, gender or marital status.

Question 9

About 10 percent of Americans over the age of sixty-five have less than $100,000 in savings.

Accepted Answer

The answer of About 10 percent of Americans over the...

Question 10

Banks and other institutions that made mortgage loans were the first sector of the financial industry to be hit by the financial meltdown in 2006-2007, largely because of mortgageloan defaults.

Accepted Answer

Banks and other institutions that made mortgage loans were indeed the first sector of the financial industry to be hit by the financial meltdown in 2006-2007, largely because of mortgage loan defaults.

Question 11

Which of the following is not true about savings goals

Accepted Answer

The statement about having a net worth of zero or less is unrelated to the topic of savings goals and is therefore not true, making option D the correct answer. The other options are true and reflect the current state of savings in America.

Question 12

Sam prepared a monthly budget and budgeted $250 a month for wages earned at his part-time job. At the end of the first month when he added up his pay stubs, he found he earned only $200. His budget will show a(n) _____.

Accepted Answer

Since Sam earned only $200 instead of the budgeted $250, he has an unfavorable variance of $50 (250-200). Therefore, the correct answer is C - unfavorable variance of $50. The other options can be eliminated because they do not accurately represent the situation described.

Question 13

In a subprime mortgage, the interest rate remains the same regardless of changes in market interest rates.

Accepted Answer

In a subprime mortgage, the interest rate is usually adjustable and can fluctuate based on changes in market interest rates.

Question 14

Risk is the possibility that cash flows will be variable.

Accepted Answer

Risk refers to the chance that the actual cash flows generated by an investment or project may differ from the expected or forecasted cash flows. This variability can result from a range of factors, including market conditions, economic fluctuations, changes in regulations or laws, and unexpected events. Therefore, risk implies uncertainty and the possibility of experiencing financial losses or gains that are different from those initially anticipated.

Question 15

Cars and boats are appreciable assets.

Accepted Answer

Cars typically depreciate in value over time, while boats can also depreciate and are not generally considered appreciable assets. Appreciable assets are those that have the potential to increase in value over time, such as real estate or stocks.

Question 16

Identify short-term, intermediate-term, and long-term financial goals. Provide examples of each.

Accepted Answer

The answer of Identify short-term, intermediate-term, and long-term financial goals....

Question 17

To increase the supply of money available for mortgage loans and new home purchases _____ bought mortgages already written by lenders, pooled them, and sold them as mortgagebacked securities to investors on the open market.

Accepted Answer

The answer of To increase the supply of money available...

Question 18

Subprime loans have very attractive interest rates because they are below the prime rate.

Accepted Answer

Subprime loans are loans given to individuals with poor credit scores, making them a higher risk for lenders. Therefore, subprime loans typically have higher interest rates than prime loans.

Question 19

Management risk is the risk that poor management of an organization with which you're dealing may adversely affect the outcome of your personalfinances planning.

Accepted Answer

This is correct. Poor management can lead to financial problems for the organization, which can have a trickle-down effect on individuals who invest in or rely on that organization. Thus, it is important to consider management risk when doing personal finance planning.

Question 20

The adjustablerate mortgage (ARM) has an interest rate tied to the increase or decrease of certain interest rates that your lender has to pay.

Accepted Answer

An ARM has an interest rate that fluctuates based on certain interest rates that the lender has to pay.

Quiz 14: Personal Finances