Exam 2 Personal Financial management Mara lynch uark

Consumer credit dates back to colonial times

TRUE

all economists do not recognize consumer credit as a major force in the american economy

FALSE

which of the following is NOT an advantage of using credit?

Increases total purchasing power

which of the following is a disadvantage of credit?

misuse can create long term financial problems

Although credit allows more immediate satisfaction of needs and desires it does not increase total purchasing power

TRUE

closed end credit is used for specific purpose and involves a specified amount

TRUE

example of closed end credit is...

installment cash credit

The credit card holders who pay off their balances in full each month are known as convenience users

TRUE

What are the 5 cs of credit that creditors look for?

Character, capacity, capital, collateral, conditions

Which of the following federal laws protects you if you have a complaint about consumer credit?

truth in lending act

One of the drawbacks of borrowing from parents or family members is that...

such loans can complicate family relationships

You can often obtain medium price loans from commercial banks savings banks and federal credit unions T or F

TRUE

Which of the following is typically a characteristic of loans from consumer financial companies?

They often make a higher percentage of small loans than other lenders

If you want to minimize your borrowing cost you may need to accept conditions that reduce the risk for your lender

TRUE

If you pledge property or other assets as collateral you will probably pay a higher interest rate on your loan than you would without collateral

FALSE (collateral lowers interest rate)

You may be able to borrow at a lower interest rate if you accept a shorter term loan

TRUE

When more than one payment is made on a simple interest loan the method of computing interest is known as the declining balance method

TRUE

With the add on interest method interest is calculated on the full amount of the original principal

TRUE

inflation increases the purchasing power of money

FALSE

You can deduct the interest paid on consumer loans on your tax returns

FALSE

If you receive a phone call from a debtor, expect follow up written communication within 5 days

TRUE

This morning you receive a phone call alleging you owe a debt, if you dispute this debt you must write to the debt collector and request verification of the obligation. How many days do you have to send this letter?

30 days

Danger signals of potential debt problems

ALL OF THESE OPTIONS (Using up your savings

Borrowing money to pay old debts

Going over credit limit on cards

Being denied credit due to repot)

Excessive indebtedness can result in

all of these choices are correct (Heavy drinking

Neglect of children

Marital difficulties

Drug abuse)

Bankruptcy is a legal process in which some or all assets of a debtor are distributed among the creditors on an installment basis

TRUE

cooperatives are commonly organized to sell _____

FOOD

Which of the following information is required on food labels?

ingredients

private label products are those that are sold by one chain of stores

TRUE

Unit pricing uses a standard unit of measurement to compare prices of packages of different sizes

TRUE

When comparing prices which of following is not true

large packages are always the best buy

Skimpflation occurs when lower quality materials are used in products like paper towels or cheaper ingredients in microwave dinners and restaurant meals which prices remain unchanged

true

One way to gather information about a product is to use an independent testing organization like underwriters laboratories

TRUE

A disadvantage of leasing a automobile would be the additional cost for turning the car in early

TRUE

_______ is the settlement of a difference of a third party whose settlement is legally binding

arbitration

Mediation uses a third party to make the decision of a consumer complainer

FALSE

Which of the following statements about legal aid society is not true

branch of the american bar association

Financial factors in addition to personal preferences should be considered when choosing housing

TRUE

What is an advantage of renting for a young single individual

limited maintenance and offers mobility

Which of the following is considered an opportunity cost of housing choices

Interest earnings lost on money used for a down payment

Renting a house or condo often means more space but also greater responsibility for maintenance compared to an apartment

TRUE

What is the average historical price to rent ratio mentioned on powerpoint

15

Which of the following is an advantage of renting a residence

lower initial costs due to a security deposit being less than a down payment

A lease is a non-binding agreement that lists conditions of a rental unit

FALSE

What is a security deposit primarily intended to cover

cost of any damages done to rental unit during the lease period

One of the financial benefits of home ownership is the ability to deduct property taxes and mortgage interest

true

Which of the following is Drawback of home ownership

limited mobility

Mobile homes, a type of manufactured home, generally tend to appreciate in value over time

false

When qualifying for a mortgage the front end ratio divides the anticipated monthly mortgage payment by what?

monthly gross income

Which of following best describes a reverse mortgage

A type of loan available to home owners age 62 or older that provides tax free income based on home equity and is repaid with interest when the home is sold or the borrower passes away

When might refinancing your mortgage be a smart decision

When market interest rates drop by at least 1% below your current mortgage rate