FINA4352 GP CHAPTER 3 KEY TERMS EXAM QUESTIONS
AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
GRADED A++
adjustable-rate mortgages (arms)
mortgage where the interest rate and payment may change every month, quarter, year,
three years, or five years
back-end ratio
total debt should not exceed 36% of gross monthly income
balloon mortgages
a mortgage in which the borrower makes fixed payments, which are based upon the
established interest rate for a long-term mortgage
budget
helps clients actively manage their money so they can achieve their financial goals
cash and cash equivalents
low-risk assets that may be readily converted to cash, also known as current assets
closed-end lease
the lessee agrees to pay a stated monthly fee for the use of the asset for a specified
time period
consumer debt ratio
the ratio of monthly consumer debt payments to monthly net income
, conventional mortgage loans
made by commercial lenders in the private sector, also known as conforming loans
current (short-term) liabilities
liabilities that are due within one year from the statement date, such as a promissory
note
emergency fund
cash or cash equivalents set aside to offset the expenses of unexpected events, such
as a job loss, a medical crisis, or major home repair
fair market value
the price at which a willing and knowledgeable buyer would purchase an asset from a
willing and knowledgeable seller
federal housing administration (fha) loans
mortgages appeal to buyers who may not meet the financial underwriting requirements
for a conventional home loan that the federal government guarantees
fixed outflows
relatively predictable and recurring expenses over which the client does not have much
control
fixed-rate loan
a loan with an interest rate that remains constant until paid in full
fixed-rate mortgagqes
have a level interest rate for the term of the loan and a fixed payment amortization
schedule
front-end ratio
AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
GRADED A++
adjustable-rate mortgages (arms)
mortgage where the interest rate and payment may change every month, quarter, year,
three years, or five years
back-end ratio
total debt should not exceed 36% of gross monthly income
balloon mortgages
a mortgage in which the borrower makes fixed payments, which are based upon the
established interest rate for a long-term mortgage
budget
helps clients actively manage their money so they can achieve their financial goals
cash and cash equivalents
low-risk assets that may be readily converted to cash, also known as current assets
closed-end lease
the lessee agrees to pay a stated monthly fee for the use of the asset for a specified
time period
consumer debt ratio
the ratio of monthly consumer debt payments to monthly net income
, conventional mortgage loans
made by commercial lenders in the private sector, also known as conforming loans
current (short-term) liabilities
liabilities that are due within one year from the statement date, such as a promissory
note
emergency fund
cash or cash equivalents set aside to offset the expenses of unexpected events, such
as a job loss, a medical crisis, or major home repair
fair market value
the price at which a willing and knowledgeable buyer would purchase an asset from a
willing and knowledgeable seller
federal housing administration (fha) loans
mortgages appeal to buyers who may not meet the financial underwriting requirements
for a conventional home loan that the federal government guarantees
fixed outflows
relatively predictable and recurring expenses over which the client does not have much
control
fixed-rate loan
a loan with an interest rate that remains constant until paid in full
fixed-rate mortgagqes
have a level interest rate for the term of the loan and a fixed payment amortization
schedule
front-end ratio
