Test Bank Docx Ch.6 Loans And Housing Decisions Grable

Introduction to Personal Finance, 2e (Grable)

Chapter 6 Loans and Housing Decisions

1) Approximately ________ U.S. households are unbanked.

A) 1 million

B) 5 million

C) 7 million

D) 10 million

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

2) The most popular alternative loan is a(n)

A) payday loan.

B) pawn loan.

C) credit card.

D) equipment loan.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

3) The ________ the APR, the ________ the true cost of credit.

A) lower; higher

B) lower; lower

C) higher; lower

D) None of these answer choices are correct.

Diff: 2

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

4) Taj obtained a $1,000 loan to be paid back at the end of 1 month. The lender quoted Taj a $200 fee. What is the APR for this loan?

A) 20%.

B) 167%.

C) 200%.

D) 243%.

Diff: 2

LO: 6.1, Section 6.1

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 3

5) A ________ should be considered a lender of last resort.

A) commercial bank

B) payday lender

C) credit union

D) credit card

Diff: 2

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

6) People are unbanked for what reason?

A) Banks are too expensive to deal with because of overdraft charges and other fees.

B) They have abused their accounts privileges in the past by overdrawing their accounts

and not repaying the funds and associated fees.

C) Belief that banks do not offer the flexible financial services that they are seeking and are less convenient than alternative financial service providers.

D) All of the choices are correct.

Diff: 2

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

7) A recent survey of U.S. households asked if they could come up with $2,000 for an unexpected expense. Approximately what percent of all American consumers said that they could probably not or certainly not be able to come up with $2,000 in an emergency?

A) 10%.

B) 25%.

C) 50%.

D) 75%.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

8) Members of alternative financial systems include

A) check cashers.

B) pawn shops.

C) payday lenders.

D) All of the choices are correct.

Diff: 1

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

9) Mainstream lenders include

A) title lenders.

B) check cashers.

C) credit unions.

D) payday lenders.

Diff: 1

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

10) John needs $300 in an emergency. If he borrows $300 for 90 days from an alternative lender, he’ll end up paying $175 in fees. What is the APR?

A) 30%.

B) 58%.

C) 237%.

D) 583%.

Diff: 2

LO: 6.1, Section 6.1

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

11) U.S. households indicated that when faced with a $2,000 financial emergency, they would try to come up with the money in which of the following ways:

A) Borrow the money from family and friends.

B) Obtain a loan from a bank, credit union, or other mainstream financial institution.

C) Work more hours to increase pay.

D) All of the choices are correct.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

12) Banks and credit unions are examples of what type of financial system?

A) Alternative.

B) Mainstream.

C) Reserve.

D) Emergency.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

13) Which lender will base their loan on the value of collateral?

A) Payday

B) Pawn shop.

C) Title loan.

D) All of the choices are correct.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

14) A good credit score is typically not required when borrowing from a

A) pawn shop.

B) bank.

C) credit union.

D) credit card company.

Diff: 1

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

15) To receive a good rate, a good credit score is required in which of the following situations?

A) Auto loan at bank.

B) Personal loan at bank.

C) Credit card.

D) All of the choices are correct.

Diff: 1

LO: 6.1, Section 6.1

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

16) Raj, who is a member of the Navy, is planning on obtaining a $1,000 payday loan to pay for a car repair. What is the maximum APR he can be charged?

A) 25%.

B) 36%.

C) 250%.

D) 391%.

Diff: 1

LO: 6.1, Section 6.1

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

17) Rebecca is planning on attending college in the fall. She has been saving money for a year to pay her tuition, but is about $1,500 short. Which of the following borrowing options would cost her the least?

A) Credit card.

B) Payday loan.

C) Student loan.

D) Personal loan at bank.

Diff: 2

LO: 6.1, Section 6.1

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

18) What loan type is typically a small-dollar debt that can be used to pay bills or make purchases?

A) Installment loan.

B) Commercial loan.

C) Personal loan.

D) All of the choices are correct.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

19) What loan type is backed by collateral?

A) Secured.

B) Unsecured.

C) Signature.

D) Cash advance.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

20) Unsecured loans are sometimes called what type of loan?

A) Payday.

B) Secured.

C) Signature.

D) Cash advance.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

21) What forms do personal loans generally come in?

A) Vehicle loans.

B) Line of credit.

C) Deposit advances.

D) All of the choices are correct.

Diff: 1

LO: 6.2, Section 6.2

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

22) With what type of loan does the borrower receive the full amount of the loan up front in a single lump sum?

A) Deposit advance.

B) Line of credit.

C) Installment loan.

D) Cash advance.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

23) Kyle received a short-term loan that he will automatically repay with his next qualifying electronic deposit. This is an example of what type of loan?

A) Payday.

B) Deposit advance.

C) Signature.

D) Cash advance.

Diff: 2

LO: 6.2, Section 6.2

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

24) A borrower must have which of the following to qualify for a deposit-advance loan?

A) High credit-score.

B) Checking account.

C) Credit card.

D) Savings account.

Diff: 1

LO: 6.2, Section 6.2

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

25) When borrowing money for the purchase of an asset, such as furniture or an automobile, a best practice is to make sure that the loan repayment period is

A) longer than the expected useful life of the asset.

B) shorter than the expected useful life of the asset.

C) longer than the expected life of the asset.

D) shorter than the expected life of the asset.

Diff: 2

LO: 6.2, Section 6.2

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

26) What is the average fee amount for a payday loan?

A) $5 per $100 borrowed.

B) $10 per $100 borrowed.

C) $15 per $100 borrowed.

D) $25 per $100 borrowed.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

27) What is the average fee amount for a deposit advance?

A) $5 per $100 borrowed.

B) $10 per $100 borrowed.

C) $15 per $100 borrowed.

D) $25 per $100 borrowed.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

28) What is the average fee amount for a line of credit?

A) $5-$10 per year.

B) $25−$50 per year.

C) $5 per $100 borrowed.

D) $10 per $100 borrowed.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

29) What type of lending allows a borrower and lender to come together via the Internet using a lending site?

A) Peer-to-peer.

B) Payday loan.

C) Line of credit.

D) Deposit advance.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

30) What type of personal loan has the highest APR?

A) Installment loan.

B) Line of credit.

C) Deposit advance.

D) Payday loan.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

31) What type of personal loan has a variable APR?

A) Installment loan.

B) Line of credit.

C) Deposit advance.

D) Payday loan.

Diff: 2

LO: 6.2, Section 6.2

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

32) What type of personal loan has a fixed monthly payment?

A) Installment loan.

B) Line of credit.

C) Deposit advance.

D) Payday loan.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

33) Rebecca needs to pay a company that towed her vehicle and only accepts cash as a form of payment. Which would be the best option if she does not have money in her bank account but does have a credit card?

A) Cash advance.

B) Car title loan.

C) Payday loan.

D) Pawn shop.

Diff: 2

LO: 6.2, Section 6.2

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

34) Credit cards can be which type of credit?

A) Secured, only.

B) Unsecured, only.

C) Neither secured nor unsecured.

D) Both secured and unsecured.

Diff: 1

LO: 6.2, Section 6.2

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

35) The process of federal financial aid includes which of the following steps?

A) Application.

B) Award.

C) Repayment.

D) All of the choices are correct.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

36) With a federal student loan, you are borrowing money from what entity?

A) FDIC bank.

B) Federal government.

C) NCUA credit union.

D) College or university.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

37) Federal direct loans include which of the following?

A) Auto loans.

B) Private loans.

C) PLUS loans.

D) Deposit advance loans.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

38) Repayment of federal student loans typically begins within what time period of completing school or dropping below half-time status as a student?

A) 6 months.

B) 9 months.

C) 1 year.

D) 2 years.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

39) Which of the following federal financial aid awards does not need to be repaid?

A) Federal subsidized loan.

B) Federal work-study.

C) Direct PLUS loan.

D) Federal unsubsidized loan.

Diff: 2

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

40) Which loan has no interest until 6 months after graduation as long as the student is enrolled half-time?

A) Federal subsidized loan.

B) Federal unsubsidized loan.

C) PLUS loan.

D) Private loan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

41) Which loan allows for consolidation of federal student loans into one loan?

A) FAFSA loan.

B) CSS loan consolidation program.

C) PLUS loan.

D) Direct consolidation loan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

42) A borrower might benefit from what program if he or she decides to work for either a nonprofit hospital or a public health organization?

A) CSS Loan Consolidation Program.

B) FAFSA Loan Forgiveness Program.

C) Public Service Loan Forgiveness Program.

D) PLUS Loan Service Program.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

43) Which loan repayment plan is based solely on annual income?

A) Standard plan.

B) Extended repayment plan.

C) Graduated repayment plan.

D) Income-sensitive repayment plan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

44) All student borrowers are eligible for which repayment plan?

A) Graduated repayment plan.

B) Extended repayment plan.

C) Income-based repayment plan.

D) Pay as you earn repayment plan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

45) How long is the repayment period for the standard plan?

A) 10 years.

B) 15 years.

C) 20 years.

D) 25 years.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

46) Which loan repayment plan forgives remaining debt after 20 years of payments?

A) Graduated repayment plan.

B) Extended repayment plan.

C) Standard plan.

D) Pay as you earn repayment plan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

47) Interest begins accruing immediately for which of the following?

A) Federal unsubsidized loan.

B) PLUS loan.

C) Direct consolidation loan.

D) All of the choices are correct.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

48) For graduate students, payments begin immediately for which loan?

A) Private loan.

B) Federal subsidized loan.

C) Federal unsubsidized loan.

D) PLUS loan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

49) Which loan is the primary form of student financial aid?

A) Private loan.

B) Federal direct loan.

C) Federal indirect loan.

D) Bank loan.

Diff: 1

LO: 6.3, Section 6.3

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

50) Demitri has decided to take a semester off from school and to work full time. What loan period will he be in the first 6 months after leaving school?

A) Repayment period.

B) Grace period.

C) Deferment period.

D) In-school period.

Diff: 2

LO: 6.3, Section 6.3

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

51) Jerome is contemplating the value associated with earning an MBA degree. He expects the total cost of attending Big Sky University to be $110,000. While he can earn $30,000 a year currently as an associate at Skymart, after graduation he can expect to earn a $75,000 salary as a manager. What is his payback period?

A) 1.05 years

B) 1.46 years

C) 2.44 years

D) 3.67 years

Diff: 2

LO: 6.4, Section 6.4

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

52) Which factor can explain the deterioration in wealth accumulation among college graduates?

A) The costs associated with college are high and getting higher.

B) More students are using debt to pay for college.

C) Rapid gains in income are slowing down.

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

53) Which factor increases the real cost of a college education?

A) Dropping classes

B) Retaking classes

C) Continually switching majors

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

54) The combination of factors that makes sure your college experience is a good investment is the best school, at the

A) highest cost, that generates the highest increase in income with the shortest payback period.

B) lowest cost, that generates the lowest increase in income with the shortest payback period.

C) lowest cost, that generates the highest increase in income with the longest payback period.

D) lowest cost, that generates the highest increase in income with the shortest payback period.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

55) A warning sign that a particular college or university might not be worth the cost include?

A) Students graduating with lots of debt.

B) High graduation rates.

C) Low default rates on student loans after graduation.

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

56) Acquiring skills through education or training can lead to increased

A) income or wealth.

B) human capital.

C) life satisfaction.

D) All of the choices are correct.

Diff: 1

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

57) Which decisions can reduce the payback period of a college education?

A) Applying for more scholarships.

B) Working full-time during the summer.

C) Picking up a part-time job during the school year.

D) All of the choices are correct.

Diff: 1

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

58) Which of the following is a tax efficient method to save for college?

A) Taxable savings.

B) Traditional Individual Retirement Account (IRA).

C) 529 plan.

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

59) Why is a Roth IRA valuable in saving for college?

A) Distributions are always tax-free.

B) Contributions made are tax-deductible.

C) Contributions withdrawn are always tax-free.

D) Distributions are tax-deferred.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

60) Warren is a retired businessman and just made a $60,000 windfall on his FANG stock. He wishes to fund a college savings account with the entire proceeds for his grandson. Which of the following options would be appropriate?

A) Roth IRA.

B) 529 Plan.

C) Coverdell Educational Savings Account (CESA).

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

61) If Sam and Brittany start saving $1,000 per month in a 529 plan, and if they can earn an 8% annualized rate of return, how much will they accumulate over the next 6 years to help fund Tim’s college expenses?

A) $77,760

B) $88,031

C) $92,025

D) $122,829

Diff: 3

LO: 6.4, Section 6.4

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

62) Kim and Larry might finance some of Tommy’s college education by purchasing EE savings bonds directly from the U.S. Treasury Department or through payroll deductions. Which of the following is incorrect with the merits of this strategy?

A) No tax will be paid when the bonds are cashed in to pay for Tommy’s tuition, room and

board, fees, books, and other necessary expenses for college.

B) Kim and Larry can only purchase a maximum of $20,000 per year.

C) The rate of interest paid on EE savings bonds is relatively low.

D) All of the choices are correct.

Diff: 3

LO: 6.4, Section 6.4

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

63) Nearly all ____ are essentially free, and need-based, meaning that the applicant must qualify based on a documented financial need.

A) student loans

B) scholarships

C) grants

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

64) When it comes to paying for college expenses, which source of funds are typically merit-based?

A) Loans.

B) Scholarships.

C) Grants.

D) All of the choices are correct.

Diff: 2

LO: 6.4, Section 6.4

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

65) Which of the following is (are) federal grant opportunities?

A) Pell Grant.

B) Federal Supplemental Educational Opportunity Grant.

C) Teacher Education Assistance for College and Higher Education (TEACH) Grant.

D) All of the choices are correct.

Diff: 1

LO: 6.4, Section 6.4

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

66) ________ is when an asset decreases in value.

A) Appreciation

B) Depreciation

C) Maintenance period

D) Leasing period

Diff: 1

LO: 6.5, Section 6.5

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

67) An automobile is an example of a(n)

A) use asset.

B) human capital asset.

C) investment asset.

D) liquid asset.

Diff: 1

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

68) What is the first step in the vehicle purchasing process?

A) Determine your transportation needs.

B) Determine how much you can afford.

C) Consider the costs of other expenses such as gas, insurance, and maintenance.

D) Review your budget.

Diff: 1

LO: 6.5, Section 6.5

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

69) What is the key variable in negotiating an auto loan?

A) Amount of payment.

B) Length of the loan.

C) Lowest interest rate possible.

D) Cost of the car.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

70) Hasan wants to purchase a car. He reviewed his budget and can comfortably afford a car payment of $325 per month. He has good credit and anticipated being able to secure a 5-year loan at 3% interest. What is the maximum cost he should pay for a car to stay within his budgeted monthly amount?

A) $18,087.

B) $14,041.

C) $14,076.

D) $15,021.

Diff: 3

LO: 6.5, Section 6.5

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 3

71) Ja'Chia wants to purchase a car. She reviewed her budget and can comfortably afford a car payment of $450 per month. She has good credit and anticipated being able to secure a 4-year loan at 4% interest. What is the maximum cost she should pay for a car to stay within her budgeted monthly amount?

A) $9,538.

B) $12,067.

C) $18,076.

D) $19,930.

Diff: 3

LO: 6.5, Section 6.5

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 3

72) Mia wants to purchase a car. She reviewed her budget and can comfortably afford a car payment of $575 per month. She has good credit and anticipated being able to secure a 5-year loan at 2.5% interest. What is the maximum cost she should pay for a car to stay within her budgeted monthly amount?

A) $17,772.

B) $24,669.

C) $32,399.

D) $34,893.

Diff: 3

LO: 6.5, Section 6.5

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 3

73) A ________ is a financial agreement between you and the dealership, where you agree to pay a certain price for the right to drive the car for a set period of time.

A) lease

B) payment

C) loan

D) right to buy

Diff: 1

LO: 6.5, Section 6.5

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

74) The key takeaway for purchasing a car is to

A) do your homework.

B) keep your options open.

C) choose the best alternative that meets your budget.

D) All of the choices are correct.

Diff: 1

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

75) What is final step in the process of purchasing an automobile?

A) Determine if leasing or financing the car is best and negotiate the best deal.

B) Locate the best bank and negotiate the best rate.

C) Locate the specific vehicle you will purchase and negotiate a purchase price.

D) Shop for the cheapest auto insurance.

Diff: 1

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

76) Karen determined how much she could afford to spend per month in car payments. How would she shop for the lowest cost loan?

A) Negotiate the lowest annual percentage rate.

B) Negotiate the longest maturity.

C) Negotiate the smallest down payment.

D) All of the choices are correct.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

77) Which information is irrelevant in determining your transportation needs?

A) Researching and identifying the best model of a car.

B) Why you need a car.

C) How far you would be driving each week.

D) Will you be carrying additional people, tools, or other equipment.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

78) When determining how much of a vehicle you can afford, what is a valid option?

A) Withdraw the money directly from savings and pay cash for the car.

B) Use a combination of cash for a down payment and borrow the remainder with a loan.

C) Borrow the entire purchase price of the car with a loan.

D) All of the choices are correct.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

79) Before contacting your insurance company to find out what it will cost to insure your potential new car, what information is required to receive a valid quote?

A) Year the car was made, manufacturer, and model.

B) Year the car was made, manufacturer, model, loan amount, and cost.

C) Year the car was made, manufacturer, model, and if leased or purchased.

D) Year the car was made, manufacturer, model, and cost.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

80) Once you're preapproved for an auto loan, you can then start researching and identifying the best vehicle models. What are valid items to research?

A) Reliability and repair history.

B) Fuel price history.

C) Repair and fuel price history.

D) Reliability, repair and fuel price history.

Diff: 2

LO: 6.5, Section 6.5

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

81) Lisa has determined that she can afford to spend $575 per month on a vehicle. She also knows that other monthly car-ownership expenses are $60 for gas, $75 for insurance, $30 for maintenance, and $25 for repairs. What is Lisa's maximum monthly car payment affordability?

A) $385

B) $410

C) $440

D) $575

Diff: 2

LO: 6.5, Section 6.5

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

82) Most individuals spend ________ of their monthly income on housing.

A) 20%−30%

B) 30%−40%

C) 30%−50%

D) 50%−60%

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

83) Landlords may encourage a renter to spend ________ of his or her gross monthly income on rent.

A) 20%

B) 30%

C) 40%

D) 50%

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

84) HUD suggests that you should spend no more than ________ of your pretax income on rent.

A) 20%

B) 30%

C) 40%

D) 50%

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

85) According to HUD, if your pretax income is $4,000, you should pay no more than ________ on rent.

A) $2,000

B) $1,200

C) $900

D) $2,500

Diff: 2

LO: 6.6, Section 6.6

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

86) ________ refers to allowing someone else, not originally on the lease, to live in the home and pay rent.

A) Leasing

B) Depositing

C) Subletting

D) Evicting

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

87) A(n) ________ deposit is a fee that may be required when you sign a rental lease.

A) application

B) security

C) pet

D) All of the choices are correct.

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

88) The cost for renter's insurance is typically about

A) $125 per month.

B) $125 per year.

C) $500 per month.

D) $500 per year.

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

89) Marty just graduated from college. She accepted a position with a firm at an annual salary of $35,000. Using HUD guidelines, what is the maximum Marty should pay for rent on a monthly basis?

A) $10,500.

B) $2,500.

C) $1,500.

D) $875.

Diff: 3

LO: 6.6, Section 6.6

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

90) Shiloh just graduated from college. She accepted a position with a firm earning $961.54 per week. Using HUD guidelines, what is the maximum Shiloh should pay for rent on a monthly basis assuming she works 52 weeks per year?

A) $4,166.

B) $1,500.

C) $1,250.

D) $1,200.

Diff: 3

LO: 6.6, Section 6.6

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

91) How much is an average pet deposit?

A) $100.

B) $200.

C) $300.

D) $400.

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

92) Which of the following is a benefit of buying versus renting a house?

A) Flexible in the short term.

B) Don't need to worry about repairs.

C) Long-term stability.

D) Allows the option of moving.

Diff: 2

LO: 6.6, Section 6.6

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

93) The person or company that owns the property you hope to rent is referred to as the

A) landlord.

B) superintendent.

C) building supervisor.

D) manager.

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

94) A(n) ________ is a legal document that outlines the terms of the rental agreement.

A) lease

B) contract

C) sublet

D) application

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

95) Elijah just graduated from college. He accepted a position with a firm at an annual salary of $45,000. Using HUD guidelines, what is the maximum Elijah should pay for rent on a monthly basis?

A) $1,125.

B) $1,200.

C) $1,250.

D) $1,300.

Diff: 2

LO: 6.6, Section 6.6

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

96) Mia just graduated from college. She accepted a position with a firm earning $50 per hour. She is expected to work 1,900 hours in a year. Using HUD guidelines, what is the maximum Mia should pay for rent on a monthly basis?

A) $2,125.

B) $2,200.

C) $2,250.

D) $2,375.

Diff: 3

LO: 6.6, Section 6.6

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 2

97) Raphael is moving into an apartment and is using his phone to record any damage before unpacking. What is he trying to protect?

A) Security deposit.

B) Final rent payment.

C) Renter's insurance.

D) Property taxes.

Diff: 2

LO: 6.6, Section 6.6

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

98) What can renters do to ensure the return of their security deposit?

A) Empty the refrigerator and freezer.

B) Really clean before moving out.

C) Patch and paint before moving out.

D) All of the choices are correct.

Diff: 1

LO: 6.6, Section 6.6

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

99) If a tenant becomes 90 days late in rent payments, what can the landlord do?

A) Lock a tenant out of his or her apartment.

B) Take possession of a renter's property as payment for unpaid rent.

C) Sue the tenant in civil court for rent and legal expenses, while starting the eviction process.

D) All of the choices are correct.

Diff: 2

LO: 6.6, Section 6.6

Bloom: Ap

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

100) A state-by-state listing of tenant rights is provided by the

A) National Realtor Association.

B) Secretary of the State.

C) National Tenancy Rights Association.

D) U.S. Department of Housing and Urban Development.

Diff: 1

LO: 6.6, Section 6.6

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

101) A ________ is a special type of loan that is secured by real property.

A) lease

B) mortgage

C) co-op

D) sublet

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

102) What is the process where, in the event the homeowner does not make monthly mortgage payments, the lender can take possession of the house and sell it to another buyer?

A) Long sale.

B) Short sale.

C) Subletting.

D) Foreclosure.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

103) What is the maximum percentage of your monthly income that should be spent on housing expenses according to the FHA?

A) 21%.

B) 25%.

C) 31%.

D) 35%.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

104) A ________ allows the homeowner to sell the house for less than what is owed on the mortgage but does not require the homeowner to pay the difference to the lender.

A) mortgage

B) short sale

C) loan

D) lease

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

105) Which ratio is the sum of monthly housing payments plus all other monthly debt payments divided by total monthly income?

A) Total fixed payments-to-income.

B) Liquidity.

C) Net worth.

D) Debt-to-income.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

106) The total fixed payments-to-income ratio should be less than what percent?

A) 36%.

B) 40%.

C) 43%.

D) 45%.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

107) The maximum debt payment for the back-end mortgage qualification ratio is what percent?

A) 36%.

B) 40%.

C) 43%.

D) 42%.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

108) Who can real estate agents represent?

A) Buyer, only.

B) Seller, only.

C) Buyer, seller, or both.

D) Lender.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

109) Which insurance protects either the lender or the borrower in case someone says he or she has a claim on the property after you've purchased it?

A) Title insurance.

B) Homeowner's insurance.

C) Liability insurance.

D) Personal injury insurance.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

110) A good faith estimate includes which of the following information?

A) Loan type.

B) Loan amount.

C) Interest rate.

D) All of the choices are correct.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

111) The loan and purchase fees associated with buying a house are referred to as what?

A) Closing costs.

B) Contract costs.

C) Appraisal costs.

D) Title costs.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

112) Which fees are paid to the lender for providing a loan?

A) Loan points.

B) Appraisal fees.

C) Inspection fees.

D) Loan origination fees.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

113) What are the two main factors that contribute to how much interest is paid on a mortgage loan?

A) Repayment period and cost of insurance.

B) Repayment period and interest rate.

C) Repayment period and closing costs.

D) Interest rate and closing costs.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

114) What is the last step in the home-buying process?

A) Contract.

B) Inspection.

C) Settlement.

D) Appraisal.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

115) The difference between what a house could sell for and the amount still owed on the mortgage is referred to as what?

A) Housing equity.

B) Housing debt.

C) Housing liability.

D) Housing asset.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

116) Tamar is applying for a mortgage. She has a monthly gross income of $4,500. The home she would like to buy has monthly payments for a mortgage of $750, a property tax of $200, and a hazard insurance premium of $125. What is her front-end mortgage qualification ratio?

A) 24%

B) 27%

C) 30%

D) 31%

Diff: 3

LO: 6.7, Section 6.7

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

117) Roberto is applying for a mortgage. He has a monthly gross income of $3,500. The home he would like to buy has monthly payments for a mortgage of $1,000, property tax of $150, homeowner’s insurance premium of $75, and mortgage insurance premium of $75. Roberto also has other monthly debts totaling $500 per month. Would he qualify based on the FHA total fixed payments-to-income ratio?

A) Yes, his total fixed payments-to-income ratio is 37%.

B) No, his total fixed payments-to-income ratio is 37%.

C) Yes, his total fixed payments-to-income ratio is 51%.

D) No, his total fixed payments-to-income ratio is 51%.

Diff: 3

LO: 6.7, Section 6.7

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

118) Rachelle has purchased a fairly new home valued at $275,000. What should she budget for her annual maintenance costs?

A) $2,750.

B) $4,000.

C) $5,500.

D) $8,250.

Diff: 2

LO: 6.7, Section 6.7

Bloom: A

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

119) Which of the following multifamily housing must be purchased through shares in a corporation that owns the building?

A) Duplex.

B) Condominium.

C) Co-op.

D) Planned Unit Development.

Diff: 2

LO: 6.7, Section 6.7

Bloom: C

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

120) Most homeowners buy and sell more than one house over their lifetime. How long does the typical homeowner stay in a house?

A) 5 years.

B) 7 years.

C) 10 years.

D) 12 years.

Diff: 1

LO: 6.7, Section 6.7

Bloom: K

AACSB / IMA: none; none

AICPA: FC: none

Min: 1

______________________________________________________________________________

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