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UNT FINA 2770 - 2770-review

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FINA 2770 Spring 2006 Review Questions for Exam #2 NOTE: These review questions are a limited sample of the materials we covered in class. This is by no means comprehensive coverage of all the topics you might see on the exam. You are still responsible for topics not covered in this review sheet. Refer to the text, homework assignments, and lecture notes for a complete coverage of the topics for exam #2. Use this review sheet only AFTER you have mastered the text, lecture notes, and homework assignments. Chapter 6 9 Define consumer credit and analyze its advantages and disadvantages. 9 Differentiate among various kinds of credit. (HINT: Closed-end and open-end credit) 9 Discuss two general rules of thumb for measuring credit capacity. 9 Describe the information creditors look for when you apply for credit. 9 Identify the steps you can take to avoid and correct credit mistakes. 9 Describe the laws that protect you if you complain about consumer credit. 9 Understand the Importance of Consumer Credit in Our Economy. 9 Describe cosigning a Loan and how it affects your personal finances. CHAPTER 6 QUIZ TRUE-FALSE _____1. Credit encourages overspending and ties up future income. _____2. With open-end credit, the borrower pays back a onetime loan in a specified period of time and with a specified number of payments. _____3. With closed-end credit, the borrower is permitted to take loans on a continuous basis and is billed for partial payments periodically . _____4. Two general rules of thumb for measuring credit capacity are the debt payments-to-income ratio and debt-to-equity ratio. _____5. Creditors determine credit worthiness on the basis of character, capacity, capital, collateral, and conditions.MULTIPLE CHOICE _____6. An example of closed-end credit is a. incidental credit. b. revolving check credit. c. credit cards. d. installment sales credit. _____7. An example of open-end credit is a. installment sales credit. b. revolving check credit. c. mortgage loans. d. automobile loans. _____8. Which one of the following is not one of the five Cs of credit? a. Conditions b. Climate c. Character d. Capacity _____9. Most of the information in your credit file may be reported for only __________ years. a. 7 b. 15 c. 20 d. 23 _____10. Which federal law provides specific cost disclosure requirements for the annual percentage rate and the finance charge as a dollar amount? a. Truth in Lending Act b. Fair Credit Reporting Act c. Fair Credit Billing Act d. Equal Credit Opportunity ActChapter 7 9 What are the sources of credit? 9 Determine the cost of credit (i.e., finance charge) by calculating interest with various interest formulas, such as simple interest and APR. 9 Assess the choices in declaring personal bankruptcy. 9 Discuss The Rule of 78s 9 Discuss Warning Signs of Debt Problems and The Serious Consequences of Debt 9 Creditors use various systems to calculate the balance on which they assess finance charges. ∗ The adjusted balance method ∗ The previous balance method ∗ The average daily balance method CHAPTER 7 QUIZ TRUE-FALSE _____1. Parents or family members are often the source of the least expensive loans. _____2. The consumer finance companies specialize in personal installment loans and second mortgages. _____3. The finance charge is the percentage cost (or relative cost) of credit on a yearly basis. _____4. The most basic method of calculating interest is the compound interest formula. _____5. The Federal Trade Commission enforces the Fair Debt Collection Practices Act. MULTIPLE CHOICE _____6. The best method of comparing credit cost is the a. rule of 78s. b. finance charge and the APR. c. declining balance method. d. add-on and adjusted balance method. _____7. Which consumer credit source has been viewed historically as a lender of last resort? a. Commercial bank b. Savings and loan association c. Credit union d. Finance company _____8. You can often obtain medium-priced loans from a. commercial banks and credit unions. b. parents or family members. c. banks through credit cards. d. finance companies and retailers._____9. Some creditors add finance charges after subtracting payments made during the billing period, this is called the a. previous balance method. b. average daily balance method. c. adjusted balance method. d. annual percentage rate method. _____10. A Consumer Credit Counseling Service is a a. local, nonprofit organization affiliated with the National Foundation for Consumer Credit. b. profit organization operated by the Better Business Bureau. c. governmental institution. d. lending institution that helps families with severe financial difficulties.Chapter 9 9 Evaluate available housing alternatives. 9 Analyzethe costs and benefits associated with renting and purchasing a house. (Rent vs. Buy) 9 Calculate the costs associated with purchasing a home. 9 Determine How Much Mortgage You Can Afford. 9 Compare and contrast the following types of mortgage loans. Be sure to discuss the major benefits and drawbacks of these loans. A) Conventional 30-years mortgage B) Conventional 15- or 20-year mortgage C) ARM D) FHA/VA fixed-rate mortgage E) GPM F) GEM 9 List some closing costs associated with a mortgage loan CHAPTER 9 QUIZ TRUE-FALSE _____1. Several financial benefits are associated with renting your place of residence. _____2. A lease is mainly designed to protect the rights of the landlord. _____3. Cooperative housing involves the purchase of an individual living unit in a multiunit complex or building. _____4. Financial risks are associated with the purchase of a home. _____5. Most mortgage rates are established by government agencies. MULTIPLE CHOICE _____6. A common advantage associated with home ownership is a. financial benefits. b. ease of mobility. c. limited financial risks. d. low initial costs. _____7. Most real estate professionals believe that the most important factor in selecting a home is a. price. b. style. c. location.d. desired features. _____8. The major factor that affects a person’s qualification for a mortgage is a. current interest rates. b. the applicant’s credit rating. c. the value of the property being purchased. d. the source of the down payment funds. _____9. Most lending institutions believe that a person can afford


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