1. Kurt has $4,500 for a down payment and thinks she can afford monthly payments
ID: 2677741 • Letter: 1
Question
1. Kurt has $4,500 for a down payment and thinks she can afford monthly payments of $300. If he can finance a vehicle with a 7%, 4-year loan, what is the maximum amount Kurt can afford to spend on the car?a. $13,528 b. $14,400 c. $16,028 d. $17,028 e. $18,028
____ 2. Leasing accounts for about ____ percent of all vehicles sold today.
a. 10 b. 14 c. 19 d. 23 e. 37
____ 3. In which of the following situations would you have to pay additional money when returning a vehicle using a closed-end lease?
a. residual value is less than expected b. residual value is more than expected c. mileage limits were exceeded d. a and c e. b and c
____ 4. Which of the following typically saves the buyer the most on an auto purchase?
a. No-haggle pricing b. Internet purchases c. Buying a car through a buying service d. Using low-interest offers rather than rebate offers. e. None of the above. Each case will be different
____ 5. When you lease your apartment from the corporation that owns the building and your lease is an ownership share, your apartment is
a. expensive. b. a cooperative. c. a condominium. d. a duplex. e. permanent.
____ 6. ____ is an up-front, one-time cost of home ownership.
a. The down payment b. Closing costs c. Property taxes d. Insurance e. a and b
____ 7. If you made a down payment of $11,000 on a $110,000 house, the lender no doubt will require ____ as a result of the size of the down payment.
a. closing points b. a bond c. mortgage insurance d. application fees e. homeowner's insurance
____ 8. Points can be deducted from federal income taxes in the year paid when they are used to
a. finance a first home. b. finance a second home. c. refinance a first home. d. refinance a second home. e. a and c only
____ 9. The majority of each monthly payment at the beginning of the loan goes to pay
a. principal. b. interest. c. real estate taxes. d. homeowner's insurance. e. private mortgage insurance.
____ 10. Earnest money is the sum of money the home buyer deposits with the
a. realtor to view homes. b. realtor for finding the desired home. c. lender to originate the loan. d. seller to indicate intent of purchase. e. lender to guarantee the purchase.
____ 11. The monthly interest on your mortgage was $690; you paid $650. The result is
a. growing equity. b. negative amortization. c. fixed interest expense. d. shrinking principal. e. indexed equity.
____ 12. The act requiring mortgage lenders to give borrowers HUD booklets and good faith estimates of the closing costs is called the
a. Equal Credit Opportunity Act. b. Truth-in-Lending Act. c. Real Estate Settlement Procedures Act. d. Mortgage Lenders Act of 1980. e. None of the above.
____ 13. Sean and Lisa (age 25 and 28, respectively) are purchasing their first home for $200,000 with a 5% down payment. They will withdraw the down payment from Lisa's IRA. They will have to pay ____ on the IRA withdrawal.
a. federal income taxes b. an early withdrawal penalty c. Social Security taxes d. a and b e. a, b, and c
____ 14. Pete and Pam want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires total installment loan payments not exceed 32% of gross monthly income. Based on Pete and Pam's financial data below, what is the maximum monthly mortgage payment for which they can qualify?
Monthly Gross Income $5,000
Car payment 400
Student loan payment 300
Current rent payment 1,000
a. $1,700 b. $1,600 c. $ 900 d. $ 600 e. $ 500
____ 15. Consumers whose debt burden has become very heavy might apply for a(n)
a. personal loan. b. single payment loan. c. buy-down loan. d. consolidation loan. e. interim financing.
____ 16. ____ loans do not have to be repaid until after you graduate from college.
a. Stafford and Perkins b. Stafford and PLUS c. Perkins and PLUS d. PLUS and SLS e. Perkins and SLS
____ 17. If your installment loan has a variable interest rate,
a. the rate will remain the same over the life of the loan. b. the amount you borrowed will change with interest rates. c. you cannot accurately predict the total interest you will pay on the loan. d. you can calculate the total interest you will pay on the loan. e. your monthly loan payment will change every month.
____ 18. The majority of loans made by savings and loan associations are ____ loans.
a. home improvement b. auto c. mortgage d. education e. consolidation
____ 19. Your debt safety ratio
a. does not include your home mortgage payment. b. is acceptable if it stays below 30%. c. need not be calculated for consumer loans. d. is calculated only for credit card debt. e. is a percentage of your gross income.
____ 20. Tom and Jane have been reviewing their financial statements. Using the following information, they have asked you to determine their debt safety ratio and advise them about assuming more debt in the future.
Assets $53,750
Monthly take-home income 3,800
Monthly mortgage payment 900
Monthly credit payments 300
Monthly loan payments 500
Explanation / Answer
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