FIN 2100 - MIDTERM 2 (Gregg UCF)
Test Questions Solved Correctly 2025-
2026 Updated.
Consumer Purchasing Phases - Answer 1. Pre-shopping - Information gathering/sources
2. Evaluation of Alternatives - Attribute assessment, Price analysis
3. Selection and Purchase - Negotiation, cash or credit, Buyer beware (subliminal sales pitches)
4. Postpurchase Activities - Maintenance, instructions, servicing.
Service Contracts / extended warranties - Answer Generally a bad deal for consumers -
Instead invest the premiums in savings account and buy high quality products
Resolving consumer complaints - Answer - Return to place of purchase
- Contact manufacturer
- Obtain assistance from a consumer agency: Better Business Bureau, State consumer protection
agency, and federal (Bureau of Consumer Financial Protection)
Prepay - Answer To see if you should take it, calculate the interest rate implicit in the deal.
Present Value should be the actual cost - Percentage of discount
Future Value is 0
Prepay Example:
Pest contract $360 annual; $30/month (end of month) or 10% discount if paid today - Answer
End mode
Pmt/yr =12
PV = negative 324 (being 360 times 90%)
Pmt = 30
N = 12
FV = 0
Solve for I = 19.9%
Mediation vs. Arbitration - Answer - Mediation is voluntary
- Arbitration is binding
- Avoid binding arbitration if possible
With mandatory arbitration, a borrower or consumer must agree to use an arbitrator, rather
than the courts, to resolve any issues.
,Steps in Resolving
Consumer Complaints - Answer Take legal action
- Small claims court
- Class action suits
- Use a lawyer
- Other legal alternatives:
Legal aid society
Prepaid legal services
Research legal questions at www.nolo.com
Cash Rebate or 0% Financing?
$25,000 car with choice of
$3,000 rebate or
0% financing for 48 months
$25,000/48 = $520.83 - Answer End mode
Pmt/yr = 12
PV = -22,000
Pmt = $520.83
N = 48
FV = 0
I = ??? = 6.41%
This example shows the real interest rate in the 0% loan is 6.41% which is HIGHER than the bank
Why are leases bad? - Answer No ownership interests
Must meet requirements
Lease payment reflects initial 3 years of depreciation (highest during life of car) + interest (You
pay for depreciation plus interest)
May have additional costs (e.g. mileage)
Home Renting Advantages and Disadvantages - Answer Advantages: Mobility, Fewer
maintenance responsibilities, lower costs
Disadvantages: Few financial benefits, restricted lifestyles, costs including security deposit,
utilities and renter's insurance.
, Home Buying Advantages and Disadvantages - Answer Advantages: Pride of ownership,
reduced income taxes, build equity
Disadvantages: Financial uncertainty, limited mobility, higher living costs.
Cost per Square Foot - Answer Under Air: 3000
Patio: 500
Garage: 500
House valued $390,000
Where is the cost per square foot?
390,000/3000 = 130
Only the air conditioned footage counts.
Steps for buying a house - Answer 1. Determine Homeownership Needs
2. Finding and Evaluating a Property to Purchase
3. Pricing the Property
4. Obtaining Financing
Mortgage payments consist of PITI
Principal, Interest, Taxes, Insurance
5. Closing
Adjustable Rate Mortgage - Answer Lower initial interest rates vs fixed
Teaser rate mortgages are latest trend
Rates will move up or down when interest rates change after a set period - subject to caps
If rates go up later, could refinance another ARM (If home value falls, unable to refinance)
Buyer assumes risk of rising interest rates
Fixed Rate Mortgage - Answer Higher initial rates
Total payments will not vary
Lender assumes risk of rising interest rates
How much home can you afford? - Answer Housing payments (PITI) should be no more than
33% of gross income, with all debt payments not exceeding 38%...
Home price should be no more than 2.5 times your annual salary
Target 10-20% down payment
Test Questions Solved Correctly 2025-
2026 Updated.
Consumer Purchasing Phases - Answer 1. Pre-shopping - Information gathering/sources
2. Evaluation of Alternatives - Attribute assessment, Price analysis
3. Selection and Purchase - Negotiation, cash or credit, Buyer beware (subliminal sales pitches)
4. Postpurchase Activities - Maintenance, instructions, servicing.
Service Contracts / extended warranties - Answer Generally a bad deal for consumers -
Instead invest the premiums in savings account and buy high quality products
Resolving consumer complaints - Answer - Return to place of purchase
- Contact manufacturer
- Obtain assistance from a consumer agency: Better Business Bureau, State consumer protection
agency, and federal (Bureau of Consumer Financial Protection)
Prepay - Answer To see if you should take it, calculate the interest rate implicit in the deal.
Present Value should be the actual cost - Percentage of discount
Future Value is 0
Prepay Example:
Pest contract $360 annual; $30/month (end of month) or 10% discount if paid today - Answer
End mode
Pmt/yr =12
PV = negative 324 (being 360 times 90%)
Pmt = 30
N = 12
FV = 0
Solve for I = 19.9%
Mediation vs. Arbitration - Answer - Mediation is voluntary
- Arbitration is binding
- Avoid binding arbitration if possible
With mandatory arbitration, a borrower or consumer must agree to use an arbitrator, rather
than the courts, to resolve any issues.
,Steps in Resolving
Consumer Complaints - Answer Take legal action
- Small claims court
- Class action suits
- Use a lawyer
- Other legal alternatives:
Legal aid society
Prepaid legal services
Research legal questions at www.nolo.com
Cash Rebate or 0% Financing?
$25,000 car with choice of
$3,000 rebate or
0% financing for 48 months
$25,000/48 = $520.83 - Answer End mode
Pmt/yr = 12
PV = -22,000
Pmt = $520.83
N = 48
FV = 0
I = ??? = 6.41%
This example shows the real interest rate in the 0% loan is 6.41% which is HIGHER than the bank
Why are leases bad? - Answer No ownership interests
Must meet requirements
Lease payment reflects initial 3 years of depreciation (highest during life of car) + interest (You
pay for depreciation plus interest)
May have additional costs (e.g. mileage)
Home Renting Advantages and Disadvantages - Answer Advantages: Mobility, Fewer
maintenance responsibilities, lower costs
Disadvantages: Few financial benefits, restricted lifestyles, costs including security deposit,
utilities and renter's insurance.
, Home Buying Advantages and Disadvantages - Answer Advantages: Pride of ownership,
reduced income taxes, build equity
Disadvantages: Financial uncertainty, limited mobility, higher living costs.
Cost per Square Foot - Answer Under Air: 3000
Patio: 500
Garage: 500
House valued $390,000
Where is the cost per square foot?
390,000/3000 = 130
Only the air conditioned footage counts.
Steps for buying a house - Answer 1. Determine Homeownership Needs
2. Finding and Evaluating a Property to Purchase
3. Pricing the Property
4. Obtaining Financing
Mortgage payments consist of PITI
Principal, Interest, Taxes, Insurance
5. Closing
Adjustable Rate Mortgage - Answer Lower initial interest rates vs fixed
Teaser rate mortgages are latest trend
Rates will move up or down when interest rates change after a set period - subject to caps
If rates go up later, could refinance another ARM (If home value falls, unable to refinance)
Buyer assumes risk of rising interest rates
Fixed Rate Mortgage - Answer Higher initial rates
Total payments will not vary
Lender assumes risk of rising interest rates
How much home can you afford? - Answer Housing payments (PITI) should be no more than
33% of gross income, with all debt payments not exceeding 38%...
Home price should be no more than 2.5 times your annual salary
Target 10-20% down payment
