FIN 200 EXAM 1 WITH 100% CORRECT
ANSWERS
What is the average daily balance method, used by many to calculate finance charges
on outstanding credit card balances? - Answer- For each day in the billing period, the
credit card company takes the beginning balance at the start of the day and then
subtracts any payments made by you on that day to determine the balance at the end of
the day
Which of the following options is a sign of fraud when dealing with creditors? - Answer-
A credit union that guarantees you a loan even before you submit an application
The book mentions all of the following features of a debt consolidation loan except? -
Answer- A guaranteed improved credit score because now you only have one loan as
opposed to many
What is the difference between a secured and an unsecured loan? - Answer- An
unsecured loan is not backed by collateral whereas a secured loan is backed by
collateral
Which of the following is not a method by which financial institutions calculate finance
charges on credit cards? - Answer- Ending balance method
Which of the following is not correct about cash advances?
A) There is no grace period for cash advances.
B) The interest rate for cash advances is higher than for purchases.
C) A cash advance is like a loan.
D) A minimum transaction fee of 5% is charged. - Answer- D
Which of the following methods of calculating finance charges on credit cards is least
favorable to the cardholder? - Answer- Previous balance method
In comparing credit cards to other forms of credit, which of the following is true? -
Answer- Credit cards are frequently an individual's most expensive form of credit.
Which of the following will increase the monthly payment you will make each month on
a loan? - Answer- Shorter maturity
Alex just purchased a new car. He traded in his old car to the dealership for $2,000 and
used that as a down payment on the new car. If the new car costs $15,500 and he can
, get a 7-yr loan with a 4% annual interest rate, what will Alex's monthly payment be? -
Answer- $184.53
What price do financial planners recommend as the ideal home price to homebuyers? -
Answer- No more than 2.5 times the total gross annual household income
What does the book discuss as causes behind the housing crisis and resulting financial
crisis in the US in 07' - 08'?
A. Relatively good economic condidtions beforehand that led to a boom in homebuilding
B. Lenders' aggresive attempts to find buyers for these new homes
C. The issuance of subprime mortgages
D. All of the above are causes of the housing crisis that the book discusses - Answer-
D. All of the above are causes of the housing crisis that the book discusses
What is the difference between an adjustable rate mortgage and a fixed rate mortgage?
- Answer- A fixed interest rate specifies a rate that will be constant throughout the life of
the mortgage while an adjustable interest rate specifies a rate that changes in response
to movements in a specific market-determined interest rate
For a conventional mortgage, what does the book suggest as the right amount for a
down payment on a house? - Answer- 10% - 20% of the home's selling price
What kinds of fees does the book mention that are included in closing costs when
purchasing a home? - Answer- Loan application fee, discount points, loan origination
fee, appraisal fee, attorney fees, inspection fees
A personal cash flow statement measures all of the following except:
A. Net worth
B. Cash inflows
C. Cash outflows
D. A personal cash flow statement measures all of the above - Answer- A. Net Worth
Jill recieves $1,000 in salary and a $100 dividend from investments each month. Jill
also pays $300 in rent and utilities, $200 on groceries, and $300 on a car payment and
insurance each month. What is Jill's net cash flow each month assuming all inflows and
outflows remain constant? - Answer- $300
Which of the following will affect cash outflows?
A. Personal consumption behavior
B. Size of family
C. Education Level
D. Age
E. All of the above will affect cash outflows - Answer- E. All of the above will affect cash
outflows
T/F: High income always leads to a positive net cash flow - Answer- False
ANSWERS
What is the average daily balance method, used by many to calculate finance charges
on outstanding credit card balances? - Answer- For each day in the billing period, the
credit card company takes the beginning balance at the start of the day and then
subtracts any payments made by you on that day to determine the balance at the end of
the day
Which of the following options is a sign of fraud when dealing with creditors? - Answer-
A credit union that guarantees you a loan even before you submit an application
The book mentions all of the following features of a debt consolidation loan except? -
Answer- A guaranteed improved credit score because now you only have one loan as
opposed to many
What is the difference between a secured and an unsecured loan? - Answer- An
unsecured loan is not backed by collateral whereas a secured loan is backed by
collateral
Which of the following is not a method by which financial institutions calculate finance
charges on credit cards? - Answer- Ending balance method
Which of the following is not correct about cash advances?
A) There is no grace period for cash advances.
B) The interest rate for cash advances is higher than for purchases.
C) A cash advance is like a loan.
D) A minimum transaction fee of 5% is charged. - Answer- D
Which of the following methods of calculating finance charges on credit cards is least
favorable to the cardholder? - Answer- Previous balance method
In comparing credit cards to other forms of credit, which of the following is true? -
Answer- Credit cards are frequently an individual's most expensive form of credit.
Which of the following will increase the monthly payment you will make each month on
a loan? - Answer- Shorter maturity
Alex just purchased a new car. He traded in his old car to the dealership for $2,000 and
used that as a down payment on the new car. If the new car costs $15,500 and he can
, get a 7-yr loan with a 4% annual interest rate, what will Alex's monthly payment be? -
Answer- $184.53
What price do financial planners recommend as the ideal home price to homebuyers? -
Answer- No more than 2.5 times the total gross annual household income
What does the book discuss as causes behind the housing crisis and resulting financial
crisis in the US in 07' - 08'?
A. Relatively good economic condidtions beforehand that led to a boom in homebuilding
B. Lenders' aggresive attempts to find buyers for these new homes
C. The issuance of subprime mortgages
D. All of the above are causes of the housing crisis that the book discusses - Answer-
D. All of the above are causes of the housing crisis that the book discusses
What is the difference between an adjustable rate mortgage and a fixed rate mortgage?
- Answer- A fixed interest rate specifies a rate that will be constant throughout the life of
the mortgage while an adjustable interest rate specifies a rate that changes in response
to movements in a specific market-determined interest rate
For a conventional mortgage, what does the book suggest as the right amount for a
down payment on a house? - Answer- 10% - 20% of the home's selling price
What kinds of fees does the book mention that are included in closing costs when
purchasing a home? - Answer- Loan application fee, discount points, loan origination
fee, appraisal fee, attorney fees, inspection fees
A personal cash flow statement measures all of the following except:
A. Net worth
B. Cash inflows
C. Cash outflows
D. A personal cash flow statement measures all of the above - Answer- A. Net Worth
Jill recieves $1,000 in salary and a $100 dividend from investments each month. Jill
also pays $300 in rent and utilities, $200 on groceries, and $300 on a car payment and
insurance each month. What is Jill's net cash flow each month assuming all inflows and
outflows remain constant? - Answer- $300
Which of the following will affect cash outflows?
A. Personal consumption behavior
B. Size of family
C. Education Level
D. Age
E. All of the above will affect cash outflows - Answer- E. All of the above will affect cash
outflows
T/F: High income always leads to a positive net cash flow - Answer- False
