FINA 200 EXAM WITH COMPLETE
SOLUTIONS
What does GDS/TDS determine? - Answer-If you can afford loan - loaner will not allow
you to spend more than 30-32% of your Gross Income on housing
5 C's of credit - Answer-Character (attitude)
Capacity (credit obligations)
Capital (equity)
Collateral
Conditions
Gross Debt Service (GDS) - Answer-(PI + T + H)/GI X 100
Total Debt Service (TDS) - Answer-(PI + T + H + D)/GI X 100
What is the difference between GDS and TDS? - Answer-GDS - Percentage of income
that goes towards housing expenses
TDS - Percentage of income that goes towards housing expenses & monthly liabilities
Contribution period for RRSP - Answer-first 60 days of year
How much can you contribute to your RRSP in a given year? - Answer-18%
Under the Home Buyer's Plan how much can you withdraw? - Answer-$20 000
What are the conditions under the Home buyer's plan? - Answer-1st time buyer
15 years to pay back
Must being to repay within the first 2 years
Under the Life Learning Plan how much can you withdraw? - Answer-20 000
What are the conditions under the Life Leaning Plan? - Answer-Repay within 10 years
Must be a full time student
What is the consequence of withdrawing from your RRSP and not paying it back during
the specified time? - Answer-It will be contributed to your income tax of the following
year
, What counts towards deduction under your income tax? - Answer-Contributions ( RPP,
IPP, RRSP)
Unions dues
Child care expenses
Disability support
Moving expenses (relocation 40km closer to new work)
TFSA dollar limit - Answer-$5000/yr + carry over rule
3 advantages of Credit - Answer-Payment Plans
Purchasing power when funds are low
Safer than cash
3 Disadvantages of Credit - Answer-Tendency to overspend
Fail to pay - consequences - bad credit rating/collateral
Reduces future income
Home Equity line of credit - Answer-Personal line of credit = (Current market value of
home - mortgage owed)
Debt-to-payment-to-income ratio - Answer-(monthly debt payments / net monthly
income)
Doesnt include house payment
Recommended to be between 15-20%
Current Ratio (Liquidity Ratio) - Answer-current assets / current liabilities
Good if it is higher than 2
Debt Ratio - Answer-Liabilities/Net Worth
Less than 0.5
Savings Ratio - Answer-Amount saved per month/GI
Greater than 10%
Credit Insurance - Answer-Ensures repayment of loan in event of death
Credit Life insurance - Answer-Repayment if borrower dies
Credit Accident/health insurance - Answer-repays loan where you experience loss of
income due to accident
Credit Property insurance - Answer-Covers personal property purchased with loan
Risk - Answer-Chance of loss
Peril - Answer-Cause of possible loss
SOLUTIONS
What does GDS/TDS determine? - Answer-If you can afford loan - loaner will not allow
you to spend more than 30-32% of your Gross Income on housing
5 C's of credit - Answer-Character (attitude)
Capacity (credit obligations)
Capital (equity)
Collateral
Conditions
Gross Debt Service (GDS) - Answer-(PI + T + H)/GI X 100
Total Debt Service (TDS) - Answer-(PI + T + H + D)/GI X 100
What is the difference between GDS and TDS? - Answer-GDS - Percentage of income
that goes towards housing expenses
TDS - Percentage of income that goes towards housing expenses & monthly liabilities
Contribution period for RRSP - Answer-first 60 days of year
How much can you contribute to your RRSP in a given year? - Answer-18%
Under the Home Buyer's Plan how much can you withdraw? - Answer-$20 000
What are the conditions under the Home buyer's plan? - Answer-1st time buyer
15 years to pay back
Must being to repay within the first 2 years
Under the Life Learning Plan how much can you withdraw? - Answer-20 000
What are the conditions under the Life Leaning Plan? - Answer-Repay within 10 years
Must be a full time student
What is the consequence of withdrawing from your RRSP and not paying it back during
the specified time? - Answer-It will be contributed to your income tax of the following
year
, What counts towards deduction under your income tax? - Answer-Contributions ( RPP,
IPP, RRSP)
Unions dues
Child care expenses
Disability support
Moving expenses (relocation 40km closer to new work)
TFSA dollar limit - Answer-$5000/yr + carry over rule
3 advantages of Credit - Answer-Payment Plans
Purchasing power when funds are low
Safer than cash
3 Disadvantages of Credit - Answer-Tendency to overspend
Fail to pay - consequences - bad credit rating/collateral
Reduces future income
Home Equity line of credit - Answer-Personal line of credit = (Current market value of
home - mortgage owed)
Debt-to-payment-to-income ratio - Answer-(monthly debt payments / net monthly
income)
Doesnt include house payment
Recommended to be between 15-20%
Current Ratio (Liquidity Ratio) - Answer-current assets / current liabilities
Good if it is higher than 2
Debt Ratio - Answer-Liabilities/Net Worth
Less than 0.5
Savings Ratio - Answer-Amount saved per month/GI
Greater than 10%
Credit Insurance - Answer-Ensures repayment of loan in event of death
Credit Life insurance - Answer-Repayment if borrower dies
Credit Accident/health insurance - Answer-repays loan where you experience loss of
income due to accident
Credit Property insurance - Answer-Covers personal property purchased with loan
Risk - Answer-Chance of loss
Peril - Answer-Cause of possible loss
