Financial Math Sem 2 – Flashcards
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Craig is considering four loans. Loan L has a nominal rate of 8.254%, compounded daily. Loan M has a nominal rate of 8.474%, compounded weekly. Loan N has a nominal rate of 8.533%, compounded monthly. Loan O has a nominal rate of 8.604%, compounded yearly. Which of these loans will offer Craig the best effective interest rate?
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a. loan L
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RJ has two loans. Loan H has a nominal rate of 5.68%, compounded daily. Loan I has a nominal rate of 6.33%, compounded monthly. Which loan's effective rate had the greater increase, relative to its nominal rate, and how much greater is its increase than that of the other loan?
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a. Loan I's increase was 0.03 percentage points greater than Loan H's.
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Jessica's bank is offering her a loan with a stated rate of 4.90% interest. If the interest is compounded every two months, what will Jessica really pay for interest?
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b. 5.00%
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Melanie is looking for a loan. She is willing to pay no more than an effective rate of 9.955% annually. Which, if any, of the following loans meet Melanie's criteria? Loan A: 9.265% nominal rate, compounded weekly Loan B: 9.442% nominal rate, compounded monthly Loan C: 9.719% nominal rate, compounded quarterly
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c. A and B
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Why do interest rates on loans tend to be lower in a weak economy than in a strong one?
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c. In a weak economy there is less demand for credit, so the price drops.
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When calculating a loan's effective interest rate, if the nominal rate is 8.5%, what value of i do you plug into your equation?
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c. 0.085
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Say you are considering two loans. Loan F has a nominal interest rate of 5.66%, compounded monthly. Loan G has a rate of 6.02%, compounded semiannually. Which loan will give the lower effective interest rate, and how much lower will it be?
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c. Loan F's effective rate will be 0.302 percentage points lower than Loan G's.
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When dealing with a loan, who benefits from compounding interest more frequently, and why?
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a. The lender benefits, because the interest compounded increases further interest calculations.
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The difference between the amount paid over the lifetime of a loan, that is compounded n times in a given year, and the principal amount borrowed is defined as the interest.
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interest
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A service charge is the sum of lender fees for taking out a loan.
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service charge
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A finance charge is the total cost of taking out a loan, which includes the interest paid over the lifetime of the loan and any service fees applied by the lender.
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finance charge
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Carlos took seven years to pay off his loan by making identical quarterly payments. The loan had a principal of $22,375 and 5.49% interest, compounded quarterly. Carlos paid a total of $28,821.67. How much did Carlos pay in service charges? Round all dollar values to the nearest cent.
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a. $1,721.31
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Jerry's loan had a principal of $22,000. He made quarterly payments of $640 for nine years until the loan was paid in full. How much did Jerry pay in interest?
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b. $1,040
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Maria is going to take out a loan with a principal of $19,700. She has narrowed down her options to two banks. Bank M charges an interest rate of 7.1%, compounded monthly, and requires that the loan be paid off in five years. Bank N charges an interest rate of 7.8%, compounded monthly, and requires that the loan be paid off in four years. How would you recommend that Maria choose her loan?
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b. Maria should choose Bank M's loan if she cares more about lower monthly payments, and she should choose Bank N's loan if she cares more about the lowest lifetime cost.
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Niki makes the same payment every two months to pay off his $61,600 loan. The loan has an interest rate of 9.84%, compounded every two months. If Niki pays off his loan after exactly eleven years, how much interest will he have paid in total? Round all dollar values to the nearest cent.
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a. $39,695.48
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Kay has decided to take out a $23,100 loan, and she wants to pay it back in quarterly installments. She has narrowed her options down to two banks. Bank V offers a six-year loan with an interest rate of 4.6%, compounded quarterly, and has a service charge of $822.45. Bank W offers an eight-year loan with an interest rate of 3.9%, compounded quarterly, and a service charge of $722.25. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.
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a. Loan W's finance charge will be $335.96 greater than Loan V's.
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Kevin has just finished paying off his loan. He was assessed a service charge of $422. He paid off the principal and the interest by making weekly payments of $36.13 for four years. If the principal was $7,150, how much did Kevin pay in finance charges, to the nearest dollar?
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d. $787
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Paul has an eight-year loan with a principal of $26,900. The loan has an interest rate of 8.18%, compounded quarterly. If Paul pays $1,527 in service charges and makes quarterly payments on his loan, what will his total finance charge be when the loan is repaid? Round all dollar values to the nearest cent.
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b. $11,546.36
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Brian took eight years to pay off his $71,900 loan. The loan had an interest rate of 8.16%, compounded quarterly. If Brian paid quarterly and made the same payment every time, how much was each payment that he made?
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b. $3,081.54
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The principal on Jan's loan was $4,700, but by the time she had paid it off after four years, the interest and principal totaled $5,388. If Jan made regular quarterly payments of $355 until the loan was paid off, how much did Jan pay for service charges?
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a. $292
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You have just finished paying off your $35,125 loan, a feat which took ten years of quarterly payments. The loan had an interest rate of 7.44%, compounded quarterly. If you also paid $5,180.70 in service charges, what percentage of the total cost was made up by your finance charges? Round all dollar values to the nearest cent.
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b. 36.47%
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Dana just finished paying off the $15,400 loan she took out four years ago. The loan had 6.68% interest, compounded monthly. If Dana paid a total of $18,321.60, how much did she pay in service charges?
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a. $730.08
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How does Truth-in-lending benefit consumers when shopping for a loan?
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d. Truth-in-lending allows consumers to know every cost that is associated with the loans they research and apply for, and helps them reach the optimal decision.
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Say you take out a loan with a principal of $44,500. The interest rate is 13.11%, compounded monthly. If you make consistent monthly payments and pay off the loan over the course of six and a half years, how much interest will you have paid in total? Round dollar amounts to the nearest cent.
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a. $21,849.92
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Why is the interest rate of a loan one of the most important things to consider when shopping around for loans?
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c. The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars.
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Tamora just made the last of her monthly payments on her loan. She had been making these payments for the past nine years. The loan had a principal of $10,675 and an interest rate of 4.75%, compounded monthly. In addition, Tamora paid $939.25 in service charges. What was Tamora's total finance charge? Round all dollar values to the nearest cent.
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c. $3,403.53
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What is the difference between a service charge and a finance charge?
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d. A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.
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Dahlia is trying to decide which bank she should use for a loan she wants to take out. In either case, the principal of the loan will be $19,450, and Dahlia will make monthly payments. Bank P offers a nine-year loan with an interest rate of 5.8%, compounded monthly, and assesses a service charge of $925.00. Bank Q offers a ten-year loan with an interest rate of 5.5%, compounded monthly, and assesses a service charge of $690.85. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.
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a. Loan Q's finance charge will be $83.73 greater than Loan P's.
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A secured loan is a loan that is backed by some form of collateral provided by the borrower.
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secured loan
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An unsecured loan is a loan that is not backed by any form of collateral.
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unsecured loan
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Repayment is the process of paying back borrowed money.
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repayment
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Collateral is an asset that a borrower pledges to a lender in order to secure a loan.
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collateral
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A finance charge is the total cost of taking out a loan, which includes the interest paid over the lifetime of the loan and any service fees applied by the lender.
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finance charge
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Sam would like to use his extensive stamp collection as collateral for a secured loan. Sam has documentation that says his stamp collection is worth $10,525.00. Sam's bank has a policy that permits loan officers to lend no more than 82.5% of the value of the collateral. What is the maximum loan amount Sam can get from his bank using his stamp collection as collateral?
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a. $8,683.13
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Determine the finance charge on a $6,500 loan with an interest rate of 9.5% compounded monthly over 36 months.
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c. $995.56
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Rachel took out a personal loan for $4,500 with a monthly payment of $173.06 for 36 months. Determine the finance charge on Rachel's loan if she takes all 36 months to pay it off.
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b. $1,730.16
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Determine the monthly payment of a loan for $3,000 at 7.5% interest compounded monthly for 36 months.
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a. $93.32
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John is planning to take out a personal loan for $4,500 to buy a car. He would like to keep his monthly payments at or below $150.00 and pay the loan off in three years. Which of the following is the greatest interest rate John can accept and still meet his criteria?
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c. 12.25% compounded monthly
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In calculating the monthly payment for a loan with an 8.5% interest rate, what value should be used for i, the interest rate per period, as it appears in the following formula?
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d. 0.0071
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Cindy would like to borrow money from her bank to restore her collectible car. It will take $12,000 to fully restore the car. Cindy's bank offers secured loans at 89% of the collateral value. How much collateral does Cindy need to offer to get a loan big enough to allow her to fully restore her car?
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d. $13,483.15
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Calculate the monthly payment for a loan of $7,500 with an 11% interest rate compounded monthly over a period of 5 years.
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b. $163.07
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Ed needs to take out a loan for $7,000 to purchase a car. His bank has offered him a loan at 10.0% interest for 36 months or 10.5% interest for 24 months. Ed's goal is to save as much money as possible by the time he pays off the loan. Which of the following statements best describes what Ed should be thinking?
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d. Since the finance charge for the 24 month loan is lower, this loan will save more.
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Judy needs to take out a personal loan for $2,500 for tuition assistance. Her bank has offered her one of the four loan packages outlined in the chart below. Determine which of the four loans will be cheapest for Judy in the long run. All interest rates are compounded monthly.
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a. loan A
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Ricky is taking out a personal loan for $12,000 to remodel his kitchen. He would like the lowest monthly payment possible, even if it means a bigger finance charge in the end. His bank has offered him a loan at 13% interest for 36 months or 12% interest for 60 months. Which of the following statements most accurately describes what Ricky should be thinking?
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a. More payments with the 60 month loan will give him the lowest monthly payment.
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The following formula is used to calculate the monthly payment on a personal loan. 2007-10-03-00-00_files/i0020000.jpg In this formula, n represents the
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a. number of periods over which interest is calculated on the loan
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What would the monthly payment be for a $5,000 loan with a 6.25% interest rate compounded monthly spread over 60 months?
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b. $97.25
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In a secured loan, collateral is
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a. valuable property that the borrower promises to give the lender in the event of default on the loan
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Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request?
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c. 48 months
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Annie would like to take out a loan to put a new playground in her yard for her kids. She offers her car which is worth $7,800 as collateral. The loan officer at the bank is permitted to loan Annie 92% of the value of her collateral. How much will Annie be able to borrow for the playground using her car as collateral?
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b. $7,176.00
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In calculating the monthly payment for a five-year loan, what value should be used for n, the number of periods over which the loan is repaid, as it appears in the following formula?
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c. 60
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An unsubsidized student loan is a federally guaranteed loan that accumulates interest and defers payment till 6 months after graduation.
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unsubsidized
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Deferment is the process in which a borrower postpones the repayment of a loan for a specified period of time.
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deferment
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An installment plan is where periodic payments are made by a borrower over the lifetime of a loan.
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installment
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Toby just graduated from four years of college. At the beginning of each year, he took out a Stafford loan with a principal of $6,125. Each loan had a duration of ten years and an interest rate of 5.3%, compounded monthly. All of the loans were subsidized. Toby plans to pay off each loan in monthly installments, starting from his graduation. What is the total lifetime cost for Toby to pay off his 4 loans? Round each loan's calculation to the nearest cent.
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b. $31,616.16
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Sebastian has just graduated after four years of university. He took out an unsubsidized Stafford loan worth $8,180 to help pay for his tuition. The loan has a duration of ten years. If the loan has an interest rate of 5.3%, compounded monthly, how much interest capitalization has occurred by the time he graduated? Round all dollar values to the nearest cent.
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c. $1,926.97
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Helena has taken out a $9,300 unsubsidized Stafford loan to pay for her college education. She plans to graduate in four years. The loan has a duration of ten years and an interest rate of 6.4%, compounded monthly. By the time Helena graduates, how much greater will the amount of interest capitalized be than the minimum amount that she could pay to prevent interest capitalization? Round all dollar values to the nearest cent.
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d. $324.33
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Jessica took out a Stafford loan worth $7,175 at the beginning of her six-year college career. The loan has a duration of ten years and an interest rate of 6.3%, compounded monthly. How much greater will Jessica's monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.
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a. $36.98
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Tamora has just graduated from college. When she entered college four years ago, she took out a $9,100 subsidized Stafford loan, which has a duration of ten years. The loan has an interest rate of 5.4%, compounded monthly. If Tamora makes monthly payments, how much interest will she have paid in total by the time the loan is paid off? Round all dollar values to the nearest cent.
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a. $2,697.20
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Antonio has just graduated from four years of college. For the last two years, he took out a Stafford loan to pay for his tuition. Each loan had a duration of ten years and interest compounded monthly. Antonio will pay each of them back by making monthly payments, starting as he graduates. Antonio's loans are detailed in the table below. Year Loan Amount ($) Interest Rate (%) Subsidized? Junior 5,894 6.9 Y Senior 5,258 7.5 N Once all of his loans are paid off, what will Antonio's total lifetime cost be? Round all dollar values to the nearest cent.
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a. $16,246.80
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Describe some of the characteristics of federal student loans.
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Federal student loans are funded by the federal government. They usually offer a lower interest rate than private loans. Federal student loans are usually deferred until graduation, meaning that the student does not owe payments until after graduating.
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Bianca took out a $2,600 unsubsidized Stafford loan. She will be attending school for four years, and she wishes to have the loan paid off five years before its normal ten-year duration is finished. The loan has an interest rate of 6.2%, compounded monthly. How much will she have to pay monthly to avoid interest capitalization?
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c. $13.43
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Any student can qualify for a subsidized Stafford loan, regardless of financial need.
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F
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Roderigo has just finished paying back his $8,575 unsubsidized Stafford loan, which he took out to fund his four-year degree. The loan had a duration of ten years and an interest rate of 7.1%, compounded monthly. Roderigo will allow interest capitalization. If Roderigo made monthly payments to pay off his loan, how much interest did he pay in total? Round all dollar values to the nearest cent.
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c. $7,353.80
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Olivia has taken out a $13,100 unsubsidized Stafford loan to pay for her college education. She plans to graduate in four years. The loan has a duration of ten years and an interest rate of 7.6%, compounded monthly. By the time Olivia graduates, how much greater will the amount of interest capitalized be than the minimum amount that Olivia could pay to prevent interest capitalization? Round all dollar values to the nearest cent.
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a. $654.45
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Why do most student loans involve a co-signer?
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d. Most students are young enough not to have much of a credit score or credit history, so a second party such as a parent or guardian can establish security of payment.
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Which loan or loans listed below are awarded based on the financial need of the student? I. Perkins loan II. subsidized Stafford loan III. unsubsidized Stafford loan
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b. I and II
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Why is deferment an important aspect of student loans?
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a. Most students are unable to make monthly payments while studying, so deferment allows them to focus on studying.
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Claudius took out an unsubsidized Stafford loan at the beginning of his six-year college career. The loan had a principal of $4,850, an interest rate of 6.5% compounded monthly, and a duration of ten years. If Claudius started paying off the loan when he graduated, what is his monthly payment? Round all dollar values to the nearest cent.
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b. $81.25
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Oliver is looking to go to college. His family does not have very much money, so he qualifies for need-based financial aid. Oliver needs to spend most of his time working at his full-time job, so he will only be able to take a few classes per semester. Oliver's parents have poor credit scores and cannot afford to take on any more debt. Based on Oliver's situation, recommend a federal loan which would be appropriate for him.
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a. subsidized Stafford loan
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Henry wants to avoid interest capitalization on his $7,800 unsubsidized Stafford loan. Henry will graduate in four years, and the loan has a duration of ten years. The loan has an interest rate of 5.6%, compounded monthly. How much must Henry pay every month to avoid interest capitalization?
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NOT b. $43.68
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Hal has just graduated from four years of college. For the last two years, he took out a Stafford loan to pay for his tuition. Each loan had a duration of ten years and interest compounded monthly, and Hal will pay each of them back by making monthly payments, starting as he graduates. Hal's loans are detailed in the table below. Year Loan Amount ($) Interest Rate (%) Subsidized? Junior 4,048 5.9 N Senior 5,295 7.6 Y Once all of his loans are paid off, what will Hal's total lifetime cost be? Round all dollar values to the nearest cent.
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d. $13,615.20
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Which statement or statements accurately describe characteristics of subsidized Stafford loan? I. grace period during which payments are not due II. based on student need III. student is responsible for all interest for the lifetime of the loan.
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NOT b. II only
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Gertrude takes out a $5,500 subsidized Stafford loan, which must be paid back in ten years. Gertrude will graduate four years after taking out the loan. If the loan has an interest rate of 6.8%, compounded monthly, and Gertrude makes monthly payments, how much interest will she pay by the time the loan is repaid? Round all dollar values to the nearest cent.
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NOT a. $4,462.40 NOT b. $1,213.28
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Horatio has taken out a $12,450 unsubsidized Stafford loan to pay for his four-year undergraduate education. The loan has an interest rate of 7.3%, compounded monthly, and a duration of ten years. Horatio will allow interest capitalization. Making monthly payments, how much interest will Horatio have paid in total by the time the loan is paid in full? Round all dollar values to the nearest cent.
answer
a. $11,068.80
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At the beginning of each of her four years in college, Miranda took out a new Stafford loan. Each loan had a principal of $5,500, an interest rate of 7.5% compounded monthly, and a duration of ten years. Miranda paid off each loan by making constant monthly payments, starting with when she graduated. All of the loans were subsidized. What is the total lifetime cost for Miranda to pay off her 4 loans? Round each loan's calculation to the nearest cent.
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d. $31,337.27
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Edgar has taken out a $6,250 unsubsidized Stafford loan to fund his four-year undergraduate degree. The loan has a duration of 10 years and an interest rate of 6.1%, compounded monthly. How much interest capitalization will have accrued by the time Edgar graduates? Round all dollar values to the nearest cent.
answer
NOT d. $1,524.96
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Kate took out a subsidized Stafford loan worth $9,710 to pay for college. The interest rate on the loan was 5.9%, compounded monthly. It took Kate 5 years to pay off the loan after graduation. What portion of the total amount she paid represented the interest?
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c. $1,526.22
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Ursula took out an unsubsidized Stafford loan to help pay for her first of her four years at college. The loan had a principal of $6,400, an interest rate of 6.9% compounded monthly. After college, Ursula started making monthly payments over a 10 year period on her loan. What percentage of the total cost of the loan is the finance charge?
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NOT b. 27.91%
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Viola took out a $8,470 Stafford loan at the beginning of her four-year college career. The loan has a duration of ten years and an interest rate of 7.5%, compounded monthly. How much more will Viola's monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.
answer
NOT c. $96.96
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Maria took out an unsubsidized Stafford loan of $6,925 to pay for college. She plans to graduate in 4 years. The loan had a duration of ten years and an interest rate of 5.0%, compounded monthly. By the time Maria graduates, how much greater will the amount of interest capitalized be than the minimum amount that she could pay to prevent interest capitalization? Round all dollar values to the nearest cent.
answer
NOT b. $1,384.00
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Amortization is the reduction of a debt over time by making periodic payments, of which, a portion of each payment goes towards the principal and the interest.
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amortization
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A title is a document provided by a qualified source stating a legal claim of ownership over real and personal property.
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title
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Auto insurance is insurance purchased by the owner of a vehicle to cover losses due to traffic accidents or theft.
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auto insurance
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Vehicle registration is the process of registering a vehicle with a government authority.
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vehicle registration
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The following table shows a portion of a three-year amortization schedule. After two years, how much has been paid into interest?
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b. $1,246.10
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Tess is going to purchase a new car that has a list price of $29,190. She is planning on trading in her good-condition 2006 Dodge Dakota and financing the rest of the cost over four years, paying monthly. Her finance plan has an interest rate of 10.73%, compounded monthly. Tess will also be responsible for 7.14% sales tax, a $1,235 vehicle registration fee, and a $97 documentation fee. If the dealer gives Tess 75% of the listed trade-in price on her car, once the financing is paid off, what percent of the total amount paid will the interest be? (Consider the trade-in to be a reduction in the amount paid.)
answer
d. 18.98%
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Scott is planning to buy a new car. He intends to trade in his existing car, a 2001 Chrysler Concorde in good condition. Using the table below, estimate how much Scott's car is worth.
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d. $1,998
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Valerie is going to purchase a new car. The car she wants has a list price of $32,495. Valerie is planning to make a down payment of $1,877. Furthermore, she plans to trade in her current car, which is a 2006 Hyundai Sonata in good condition. She will finance the rest of the cost by making monthly payments over five years. She can finance the cost at a rate of 8.64%, compounded monthly. She will also have to pay 8.23% sales tax, a $2,243 vehicle registration fee, and a $314 documentation fee. If the dealer gives Valerie 87.5% of the trade-in price on her car, listed below, approximately how much will Valerie pay in total for her new car? (Round all dollar values to the nearest cent, and consider the trade-in to be a reduction in the amount paid.)
answer
b. $38,821
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Jerry's new car has a list price of $22,415. The sales tax in Jerry's state is 8.75%, and he is responsible for a $1,925 vehicle licensing fee and a $79 documentation fee. Jerry plans to make a down payment of $3,000 and finance the rest at an interest rate of 10.86%, compounded monthly. If Jerry's financing plan spans three years, what will his monthly payment be?
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d. $763.89
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The following table shows a portion of a four-year amortization schedule. After twenty-five payments, how much of the principal has been paid off?
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c. $9,543.97
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Calculate the monthly payment for a 5-year car loan of $23,570 at 10.43% interest, compounded monthly.
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d. $505.79
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Renee is going to buy a new car that has a list price of $19,675. She will be responsible for $1,420 in vehicle registration fees, $85 in documentation fees, and 8.92% sales tax. She plans to trade in her current car, a 2002 Buick LeSabre in good condition, and finance the rest of the cost over four years at an interest rate of 11.34%, compounded monthly. If the dealer gives Renee 85% of the listed trade-in value for her car, what will her monthly payment be? Round all dollar values to the nearest cent.
answer
a. $521.96
question
The following table shows the first segment of a five-year amortization schedule. After one year of payments, how much has been paid to interest?
answer
a. $1,100.42
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Dennis has just made the final monthly payment necessary for paying off his car financing. When he purchased the car three years ago, it had a list price of $23,878. Dennis traded in his good-condition 2001 Honda Odyssey and financed the rest of the cost at an interest rate of 11.82%, compounded monthly. The dealer gave Dennis 85% of the trade-in value of his car, listed below. Dennis was also responsible for paying 9.05% sales tax, a $1,474 vehicle registration fee, and a $225 documentation fee. All told, how much did Dennis pay in interest? (Round all dollar values to the nearest cent, and consider the trade-in to be a reduction in the amount paid.)
answer
a. $3,919.77
question
The following table shows a portion of a three-year amortization schedule. 2007-10-05-00-00_files/i0120000.jpg Use the information in the table to decide which of the following statements is true.
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c. The amount applied to the principal is increasing each month.
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Reg has just purchased a new car. The car had a list price of $22,499, and he was responsible for 7.96% sales tax, a $2,138 vehicle registration fee, and a $262 documentation fee. Reg's financing has an interest rate of 10.27%, compounded monthly, and a duration of three years. If Reg makes a monthly payment of $773.89, which of the following was his down payment? Round all dollar values to the nearest cent.
answer
d. $2,800
question
Cassandra purchased a new car. The car had a list price of $16,870. Cassandra made a down payment of $1,800 and financed the rest, paying 12.3% interest compounded monthly over a payment period of four years. If Cassandra also had to pay 7.8% sales tax, a $895 vehicle registration fee, and a $68 documentation fee, what is her monthly payment?
answer
b. $459.42
question
The following table shows a portion of a five-year amortization schedule. 2007-10-05-00-00_files/i0040000.jpg What percent of the payments made were due to interest for the months shown?
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NOT a. 30.9%
question
A trade-in is most closely related to which of the following?
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a. A down payment, because it reduces the amount financed.
question
Charles is going to purchase a new car that has a list price of $21,450. He is planning on trading in his good-condition 2004 Dodge Neon and financing the rest of the cost over three years, paying monthly. His finance plan has an interest rate of 12.28%, compounded monthly. Charles will also be responsible for 6.88% sales tax, a $1,089 vehicle registration fee, and a $124 documentation fee. If the dealer gives Charles 80% of the listed trade-in price on his car, once the financing is paid off, what percent of the total amount paid will the interest be? (Consider the trade-in to be a reduction in the amount paid.)
answer
NOT d. 12.86% NOT b. 15.67%
question
Terry has just purchased a new car, which had a list price of $16,825. She had to pay 7.19% sales tax, a $1,128 vehicle registration fee, and a $190 documentation fee. Terry traded in her previous vehicle, a 2003 Honda Element in good condition, and financed the rest of the cost over five years at an interest rate of 10.59%, compounded monthly. If the dealer gave Terry 90% of the listed trade-in value on her car, how much will Terry have paid in interest, once the loan is paid off? (Round all dollar values to the nearest cent, and consider the trade-in to be a reduction in the amount paid.)
answer
d. $3,914.68
question
Laura is currently paying off her four-year car financing. When she purchased her car, it had a list price of $19,858. Laura traded in her previous car, a good-condition 2000 Honda Insight, for 85% of the trade-in value listed below, financing the rest of the cost at 9.5% interest, compounded monthly. She also had to pay 9.27% sales tax, a $988 vehicle registration fee, and a $77 documentation fee. However, because Laura wants to pay off her loan more quickly, she makes a total payment of $550 every month. How much extra is she paying monthly? Round all dollar values to the nearest cent.
answer
b. $71.72
question
The following table shows the first two years of a three-year amortization schedule. 2007-10-05-00-00_files/i0020000.jpg Use the information in the table to decide which of the following statements is true.
answer
d. The payment amount each month stays the same.
question
Suzanne has purchased a car with a list price of $23,860. She traded in her previous car, which was a Dodge in good condition, and financed the rest of the cost for five years at a rate of 11.62%, compounded monthly. The dealer gave her 85% of the listed trade-in price for her car. She was also responsible for 8.11% sales tax, a $1,695 vehicle registration fee, and a $228 documentation fee. If Suzanne makes a monthly payment of $455.96, which of the following was her original car?
answer
NOT d. 2007 Dakota
question
When is taking a zero percent APR option more beneficial than a large rebate?
answer
d. If the money you would save over the course of the loan is greater than the instant rebate, the zero percent APR is a better choice.
question
Christopher has just made the final monthly payment necessary to pay off his car financing. The car had a list price of $25,995. He made a down payment of $2,434. Additionally, there was a $1,626 vehicle registration fee and a $275 documentation fee. He also paid sales tax of 8.44% on the cost of the vehicle. He included the taxes and fees with the purchase price of the car in a four-year finance agreement with an interest rate of 11.10%, compounded monthly. After completing payment of the four-year loan, what was the total amount of money that Christopher paid for his car? Round to the nearest dollar.
answer
d. $36,808
question
The following table shows a portion of a four-year amortization schedule. 2007-10-05-00-00_files/i0060000.jpg After three years, how much of the principal has been paid off?
answer
NOT b. $22,706.64
question
A lease is a contract stating, from one individual to another, the terms of use of real or personal property for a designated period of time in return for payment or other forms of compensation.
answer
lease
question
Depreciation is the decrease in the value of real or personal property over a period of time.
answer
depreciation
question
A security deposit is an up-front cash payment to protect the dealer from damage to the vehicle and is refunded to the borrower at the end of the lease.
answer
security deposit
question
An acquisition fee is an administration fee charged by the leasing company.
answer
acquisition fee
question
A disposition fee, set by the car lease company, is due at the end of the lease to compensate the leasing company for the expense of selling or otherwise disposing of a vehicle.
answer
disposition fee
question
The money factor is the interest rate the lease is based upon. It is computed by dividing the annual percentage rate by 2400.
answer
money factor
question
The residual is the value of the car at the end of the lease term.
answer
residual
question
Tim needs a new car while he attends college in the United States for the next three years. The car he would like has a MSRP of $15,000. A local dealer can get him a 3-year loan with a 7% interest rate if Tim can give them a $1,500 down payment. The same dealer offers the same car to lease with a money factor of 0.00271 and a residual value of 75%. The lease requires an additional fee of $1,250 to cover Tim's security deposit and the acquisition and documentation fees for the car. Tim is looking to drive the car home with the smallest initial out-of-pocket cost. Which of the following statements is true?
answer
a. The initial out-of-pocket cost is less for the lease.
question
Bob is thinking about leasing a car with a MSRP of $24,000 for three years. After three years, the leasing company expects the car to have a value of 72% of its original MSRP. What will the residual value of the car be after three years?
answer
c. $17,280
question
Ralph is leasing a $32,000 car for 36 months. The terms of his lease include an 8.5% interest rate (money factor of 0.00354) and a residual value of 72%. Determine Ralph's approximate monthly lease payment.
answer
d. $443.73
question
Approximate the interest rate for a lease that comes with a money factor of 0.0027.
answer
c. 6.5%
question
Ralph is leasing a car worth $24,000 for three years. His leasing company says that the car Ralph is leasing will only be worth $16,000 at the end of his lease. Approximately what percentage of the car's original value will Ralph need to pay as part of his lease?
answer
c. 33%
question
Leasing a car for a short time is usually cheaper than buying the same car since
answer
d. in leasing a car you pay only for the depreciation of the car rather than the total value
question
Determine the monthly payment for a 36 month lease on a $26,000 car with a residual of 71% and an interest rate of 7.5%.
answer
d. $348.38
question
One difference between obtaining a car with a lease or a loan is that
answer
c. a loan finances the total purchase price of the car while a lease finances only the depreciated value and related fees
question
Which of the following would be a good argument to lease rather than buy?
answer
b. "I prefer the warranty that covers repair costs of a new car."
question
Bob is thinking about leasing a car. The lease comes with an interest rate of 8%. Determine the money factor that will be used to calculate Bob's payment.
answer
c. 0.00333
question
Calculate the monthly lease payment for a 36-month lease on a car with a $29,000 MSRP, a 79% residual value, and a money factor of 0.00365.
answer
a. $358.64
question
Which of the following would be a good argument to buy rather than lease?
answer
d. "I would prefer to walk out of the deal in the end with something to show for the money I put in."
question
Which of the following statements explains the difference between a lease and a loan?
answer
a. At the end of a loan the car belongs to you, but at the end of a lease, the car still belongs to the lease company.
question
If a person wanted to purchase his or her dream car, and keep it for many years, is leasing or buying the better option? Why?
answer
a. Buying would be the better option because the overall cost would be less. After the car is paid off, the owner gets much more value from the car, having already paid it off.
question
Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a residual value of 57%. The MSRP for the car Jennifer is leasing is $17,500. What will Jennifer's monthly lease payment be?
answer
d. $312.06
question
Determine the money factor for a lease with an interest rate of 9%.
answer
a. 0.00375
question
Why do most leases limit the number of miles a lessee can drive in a year?
answer
d. Since the lessee is essentially paying the value of depreciation when leasing a car, the amount of miles travelled affect the end value of the car.
question
Henry is at the end of a three-year lease for his car. His leasing company says that his car is currently worth $12,780, a 72% residual value. Determine the original MSRP of Henry's leased car.
answer
c. $17,750.00
question
Cindy has decided to lease a car. The lease includes a money factor of 0.00354. What interest rate is Cindy being charged in her lease?
answer
b. 8.5%
question
Sally spends $1,500 each month on her mortgage, mortgage insurance and property taxes. She has three credit cards with minimum monthly payments that total to $125.00 and a monthly car payment for $349.00. She currently brings in a gross monthly income of 3,750.00 from her job. Calculate Sally's debt-to-income (DTI) ratio.
answer
d. 53%
question
Susan just got a promotion that increased her annual salary from $52,000 to $68,000. Susan's monthly expenses included a mortgage payment of $1,500, three minimum credit card payments that total $350, a lease payment of $280, a student loan payment of $250, and a personal loan payment of $325. How did Susan's debt-to-income ratio change with her promotion?
answer
c. Susan's debt-to-income ratio decreased by about 15%.
question
Which of the following is likely to keep Harry from being approved for a loan?
answer
a. Harry's debt-to-income is a stable 39%.
question
Bob would like to get his debt-to-income (DTI) ratio down to 36%. His current monthly expenses are outlined in the chart below. He would like to lower his DTI by paying off some of his credit card debt, lowering his combined minimum monthly credit card payment. What would Bob's minimum monthly credit card payment need to be in order to reach his DTI goal of 36%?
answer
a. $175.80
question
A lender will verify and carefully consider your income before approving you for a loan because
answer
a. they need to be sure you will be able to pay the loan back
question
Kurtis is expecting a promotion which, hopefully, comes with a raise. He would like his raise to help him correct a high debt-to-income (DTI) ratio of 43%. His current annual salary is $53,000. How much of a raise would Kurtis need applied to his annual salary to get his DTI ratio down to a more reasonable 36%?
answer
c. $10,305
question
Trudy's monthly expenses are outlined in the chart below. Trudy's job pays her $36,000 annually. Determine Trudy's DTI (debt-to-income) ratio.
answer
d. 44%
question
Lenders look at the credit score of a loan applicant in order to
answer
b. ensure that the applicant is financially responsible
question
Gina would like to apply for a loan, but knows that her current debt-to-income (DTI) ratio will keep her from being approved. Her current monthly debt includes a rent payment of $950.00, a car payment of $238.00, a student loan payment of $149.00, and two credit cards with a combined minimum monthly payment of $78.00. The bank requires a DTI of 36% in order to approve Gina?s loan application. What would Gina's gross monthly income need to be to get approved for the loan?
answer
d. at least $3,930.56
question
Tom was recently turned down for a loan. He would like to re-apply next year for the same loan. Which of the following is not a change he could make to increase his chances of being approved for the loan?
answer
b. Take out some more credit cards to increase his monthly debt.
question
Which of the following is something a lender will not consider when reviewing your loan application?
answer
b. family size
question
Joey would like to apply for a loan but knows that his high debt-to-income (DTI) ratio will probably get in his way. He would like to lower his DTI ratio by lowering the amount of his gross monthly income that goes to living expenses. Joey's current monthly expenses include a rent payment of $1,100, a $178 car payment, and a combined minimum payment of $220 for his credit card debt. His current gross monthly income is $3,600. If Joey moves to a new apartment, what is the maximum monthly rent payment he can make and still maintain a DTI ratio of 36%?
answer
NOT c. $922
question
Trish is having trouble understanding why she was not approved for her loan. Which of the following probably kept Trish from getting her loan?
answer
b. Trish's credit score is a solid 525.
question
Which of the following is something you would not expect to see on a basic loan application?
answer
b. doctor's name and address
question
The debt-to-income (DTI) ratio of a borrower is used to compare _____ to the borrower's gross monthly income.
answer
d. monthly living expenses (rent or mortgage, property tax, mortgage insurance, minimum credit card payments, and monthly loan payments)
question
Why is credit history such an important factor in being considered for a loan?
answer
a. Credit history shows how responsible people are in making payments on time and their general ability to make monthly payments.
question
Jim has an annual salary of $96,000. His monthly expenses include a $2,500 mortgage payment, a $250 lease payment, $500 in minimum credit card payments, and a $425 payment on his speed boat. He also receives $1,200 in interest from his savings and other accounts each month. Calculate Jim's DTI (debt-to-income) ratio.
answer
c. 40%
question
How would a bigger down payment be beneficial to borrowers?
answer
d. A bigger down payment is money paid toward principal, interest free, which also decreases the amount paid monthly.
question
In order to approve a loan, lenders want to see a credit score of at least
answer
c. 700
question
Johnny's monthly expenses and income are listed below. Calculate Johnny's debt-to-income (DTI) ratio.
answer
c. 31%
question
A written contract is not legally binding until
answer
b. it is signed by all parties involved
question
Bob and Suzie are both signing a contract where Bob agrees to remove a beehive and Suzie agrees to pay Bob $120.00. What is the consideration in this example?
answer
c. both the removal of a beehive and the payment of $120.00
question
The following statement is from the contract Peter signed with his Homeowners' Association (HOA). "Overnight parking on community streets is prohibited. For the purpose of this contract, 'overnight' will be defined as the hours between 11:00 p.m. and 4:00 a.m. The HOA will monitor overnight parking not less than once every calendar week with nightly patrols by community security. "In the event a car is found parked on community streets overnight and that ownership of the offending car can accurately be verified as a community homeowner, the homeowner will receive one (1) written warning asking him or her to correct the situation. A second and third infraction by the same homeowner, whether or not it is with the same car, will result in a monetary fine as permitted by CC&R guidelines and HOA bylaws. Further infractions (past 3) will result in monetary fines in addition to the towing of the car at the homeowner's expense." Peter just received a written warning from the HOA concerning the parking of his car overnight on a community street. Which of the following statements is true?
answer
NOT d. Parking in the street overnight tonight will probably just get Peter another warning.
question
The following section is a statement from the rental agreement at a local auto rental agency. "Upon checkout, the fuel level of the vehicle will be determined by turning the vehicle on and visually inspecting the fuel gauge. The approximate fuel level will be recorded on the Check-Out sheet and verified with initials by the vehicle Renter. One copy of the Check-Out sheet will be given to the customer. Another copy will be kept with the on-site records of the vehicle. The rented vehicle must be returned with a minimum fuel level the same as that indicated on the Check-Out sheet. A vehicle returned with a fuel level less than the approximate level indicated on the Check-Out sheet will be completely refueled with on-site pumps. The price of the fuel used to refuel the vehicle will be added to the Renter's total charge at a cost of $4.50 per gallon plus a $5.00 re-fueling charge." According to the rental agreement, which is not a responsibility of the rental agency representative?
answer
a. Refuel the vehicle before the Renter drives it away.
question
Janice needs a tree stump removed from her back yard. She has agreed to hire a local handyman named Steve to do the work. Janice wants Steve to completely remove the stump and any major root systems that may still exist, all for the price of $300. Steve offered to the job based on an hourly rate of $40.00 per hour. He estimated that the job would take between seven and eight hours for a rough estimate of $300.00. He wants to be sure that he gets paid more for his time if the job happens to take longer than expected. He also wants Janice to pay for the rental of any equipment he might need to accomplish the job in the time quoted. After the two discuss what was needed on each side, Janice writes up the following contract and asked Steve to sign. " I, Janice Stevenson, agree to pay Steve Jacobsen $300.00 for the complete removal of one tree stump and related root system from my back yard. (signed) Janice Stevenson" Which of the following is not a change Steve should make to the contract before he signs it?
answer
a. Steve needs to increase the total cost from $300.00 to $500.00.
question
The following section is a statement from the rental agreement Tim signed when he rented his car this past weekend. "Upon checkout, the fuel level of the vehicle will be determined by turning the vehicle on and visually inspecting the fuel gauge. The approximate fuel level will be recorded on the Check-Out sheet and verified with initials by the vehicle Renter. One copy of the Check-Out sheet will be given to the customer. Another copy will be kept with the on-site records of the vehicle. "The rented vehicle must be returned with a minimum fuel level the same as that indicated on the Check-Out sheet. A vehicle returned with a fuel level less than the approximate level indicated on the Check-Out sheet will be completely refueled with on-site pumps. The price of the fuel used to refuel the vehicle will be added to the Renter's total charge at a cost of $4.50 per gallon plus a $5.00 refueling charge." Tim is running extremely late and has just 5 minutes to return his rental car to the agency. The fuel tank in the car is half empty. It was full when he picked it up. (The car has a 12-gallon fuel tank.) He doesn't think he can get gas and get to the agency to return the car in time. Returning the car a day late will result in an extra daily rental charge of $32.00 and refueling the car on his own will cost $2.59 per gallon at the local gas station. Which of the following statements is true?
answer
b. It would be cheaper to return the car on time and pay the refueling costs.
question
The following section is a statement from the rental agreement Tim signed when he rented his car this past weekend. "Upon checkout, the fuel level of the vehicle will be determined by turning the vehicle on and visually inspecting the fuel gauge. The approximate fuel level will be recorded on the Check-Out sheet and verified with initials by the vehicle Renter. One copy of the Check-Out sheet will be given to the customer. Another copy will be kept with the on-site records of the vehicle. "The rented vehicle must be returned with a minimum fuel level the same as that indicated on the Check-Out sheet. A vehicle returned with a fuel level less than the approximate level indicated on the Check-Out sheet will be completely refueled with on-site pumps. The price of the fuel used to refuel the vehicle will be added to the Renter's total charge at a cost of $4.50 per gallon plus a $5.00 refueling charge." Tim forgot to refuel the vehicle when he returned it. His Check-Out sheet indicates that the vehicle had about 1/2 of a tank left. The tanks is now nearly empty. If it takes 11.75 gallons of gas to refuel the car Tim rented, how much extra should he expect to pay because he forgot to get gas?
answer
d. $57.88
question
The following statement is from the contract Peter signed with his Homeowners' Association (HOA). "Overnight parking on community streets is prohibited. For the purpose of this contract, 'overnight' will be defined as the hours between 11:00 p.m. and 4:00 a.m. The HOA will monitor overnight parking not less than once every calendar week with nightly patrols by community security. "In the event a car is found parked on community streets overnight and that ownership of the offending car can accurately be verified as a community homeowner, the homeowner will receive one (1) written warning asking him or her to correct the situation. A second and third infraction by the same homeowner, whether or not it is with the same car, will result in a monetary fine as permitted by CC&R guidelines and HOA bylaws. Further infractions (past 3) will result in monetary fines in addition to the towing of the car at the homeowner's expense." After parking his car at 12:30 a.m. last night, Peter was approached by the on-duty neighborhood security guard. The guard told Peter that it was against established HOA rules to park overnight on community streets and reminded Peter that he had signed the contract agreeing to adhere to those rules. He then asked Peter to move the car onto his driveway and warned him that a second offense would result in a monetary fine. Which of the following facts invalidates the contract between Peter and the HOA?
answer
NOT d. Peter parked in the street even though his driveway was empty.
question
In forming a contract, the "meeting of the minds" is
answer
NOT c. a phrase used to describe a verbal contract or a contract made without signatures from the parties involved.
question
The following statement is from the contract Peter signed with his Homeowner's Association (HOA). "Overnight parking on community streets is prohibited. For the purpose of this contract, 'overnight' will be defined as the hours between 11:00 p.m. and 4:00 a.m. The HOA will monitor overnight parking not less than once every calendar week with nightly patrols by community security. "In the event a car is found parked on community streets overnight and that ownership of the offending car can accurately be verified as a community homeowner, the homeowner will receive one (1) written warning asking him or her to correct the situation. A second and third infraction by the same homeowner, whether or not it is with the same car, will result in a monetary fine as permitted by CC&R guidelines and HOA bylaws. Further infractions (past 3) will result in monetary fines in addition to the towing of the car at the homeowner's expense." Because of the extremely low ground effects and body profile on his racing car, Peter is unable to drive his car off of the street and onto the driveway. He has parked on the street overnight for the past five weeks. He has received one written warning and one monetary fine from the HOA. What consequences should Peter expect after this week's security check?
answer
b. He will receive another monetary fine.
question
The following section is a statement from the rental agreement Tim signed when he rented his car this past weekend. "Upon checkout, the fuel level of the vehicle will be determined by turning the vehicle on and visually inspecting the fuel gauge. The approximate fuel level will be recorded on the Check-Out sheet and verified with initials by the vehicle Renter. One copy of the Check-Out sheet will be given to the customer. Another copy will be kept with the on-site records of the vehicle. The rented vehicle must be returned with a minimum fuel level the same as that indicated on the Check-Out sheet. A vehicle returned with a fuel level less than the approximate level indicated on the Check-Out sheet will be completely refueled with on-site pumps. The price of the fuel used to refuel the vehicle will be added to the Renter's total charge at a cost of $4.50 per gallon plus a $5.00 re-fueling charge." As a part of the check-out process, it is customary for a car rental agency to look over the car with the customer and fill out the Check-Out sheet together. As Tim was walking around the car looking for damages that he didn't want to be held responsible for, the agency representative turned on the car, took note of the fuel level, and indicated it on the Check-Out sheet. Since Tim didn't have any questions, the clerk handed him the keys and a copy of the Check-Out sheet and wished him well.
answer
NOT b. The representative failed to give Tim a copy of the Check-Out sheet.
question
The following statement is from a contract between a homeowner and the Homeowners' Association (HOA) for his neighborhood. "Overnight parking on community streets is prohibited. For the purpose of this contract, 'overnight' will be defined as the hours between 11:00 p.m. and 4:00 a.m. The HOA will monitor overnight parking not less than once every calendar week with nightly patrols by community security. "In the event a car is found parked on community streets overnight and that ownership of the offending car can accurately be verified as a community homeowner, the homeowner will receive one (1) written warning asking him or her to correct the situation. A second and third infraction by the same homeowner, whether or not it is with the same car, will result in a monetary fine as permitted by CC&R guidelines and HOA bylaws. Further infractions (past 3) will result in monetary fines in addition to the towing of the car at the homeowner's expense." According the contract, which of the following is not a responsibility of the HOA?
answer
NOT d. tow the car of a homeowner who has parked in the street overnight five nights in a row
question
If it is completely impossible to put a contract in writing, which of the following would be the best substitute?
answer
NOT a. having a friend witness the verbal agreement
question
Which of the following is not a recommended action to perform before signing a contract?
answer
d. Sign the contract, putting question marks next to items that don't make sense.
question
Verbal contracts are generally discouraged because
answer
b. without a physical signature, they can be very difficult to enforce
question
The following section is a statement from the rental agreement Tim signed when he rented his car this past weekend. "Upon checkout, the fuel level of the vehicle will be determined by turning the vehicle on and visually inspecting the fuel gauge. The approximate fuel level will be recorded on the Check-Out sheet and verified with initials by the vehicle Renter. One copy of the Check-Out sheet will be given to the customer. Another copy will be kept with the on-site records of the vehicle. "The rented vehicle must be returned with a minimum fuel level the same as that indicated on the Check-Out sheet. A vehicle returned with a fuel level less than the approximate level indicated on the Check-Out sheet will be completely refueled with on-site pumps. The price of the fuel used to refuel the vehicle will be added to the Renter's total charge at a cost of $4.50 per gallon plus a $5.00 refueling charge." Tim is running extremely late and has just 5 minutes to return his rental car to the agency. The fuel tank in the car is half empty. It was full when he picked it up. (The car has a 12-gallon fuel tank.) He doesn't think he can get gas and get to the agency to return the car in time. Returning the car a day late will result in an extra daily rental charge of $32.00 and refueling the car on his own will cost $2.59 per gallon at the local gas station. Which of the following statements is true?
answer
b. It would be cheaper to return the car on time and pay the refueling costs.
question
The following statement is from the contract Peter signed with his Homeowners' Association (HOA). "Overnight parking on community streets is prohibited. For the purpose of this contract, 'overnight' will be defined as the hours between 11:00 p.m. and 4:00 a.m. The HOA will monitor overnight parking not less than once every calendar week with nightly patrols by community security. "In the event a car is found parked on community streets overnight and that ownership of the offending car can accurately be verified as a community homeowner, the homeowner will receive one (1) written warning asking him or her to correct the situation. A second and third infraction by the same homeowner, whether or not it is with the same car, will result in a monetary fine as permitted by CC&R guidelines and HOA bylaws. Further infractions (past 3) will result in monetary fines in addition to the towing of the car at the homeowner's expense." Peter just received a written warning from the HOA concerning the parking of his car overnight on a community street. Which of the following statements is true?
answer
a. Parking in the street overnight tonight may get Peter fined.
question
What is required to have a legally valid contract?
answer
d. The contract must represent a valid agreement between parties and an exchange of something of value between parties must have occurred or been promised to occur.
question
Why do interest rates on loans tend to be higher in a strong economy than in a weak one?
answer
a. Credit markets increase in a strong economy, and with increased demand come increased prices.
question
Below is an excerpt from the home loan contract Kyle signed with his bank. "The sum of the principal of the loan and all applicable interest will be divided into 360 monthly payments according to the amortization schedule. The Buyer shall make each monthly payment by the first day of the month it is due. A payment not received by the first day of the month it is due will be considered delinquent. A payment not received by the fifteenth day of the month it is due will be subject to a late charge of $75.00. If a payment is not received by the last day of the month it is due, the Buyer and transaction shall be reported to the appropriate credit agencies. In the event of delinquency, the Buyer may divide any payment not received into not more than three equal installments to be included on the next consecutive monthly payments. Notification of the Buyer's intent to do so must be made by written letter or phone call to the phone number and address listed below within one business week of delinquency." Kyle failed to make his payment by the first of this month. Kyle's monthly payment is currently $1,200. If Kyle decides to split the missing payment into two parts and pay it over the next two months, which of the following statements is false?
answer
d. Kyle's monthly payments for the next two months will remain $1,200.
question
Andrew is choosing between four loans. Loan P has a nominal rate of 10.393%, compounded daily. Loan Q has a nominal rate of 10.516%, compounded weekly. Loan R has a nominal rate of 10.676%, compounded monthly. Loan S has a nominal rate of 10.755%, compounded annually. Which loan will give Andrew the best effective interest rate?
answer
d. loan S
question
Brian bought a new air conditioning unit on his credit card. The unit had a base price of $435. Brian made no other purchases on his credit card. Brian's credit card has an interest rate of 9.4%, compounded monthly, and Brian paid off the balance by making monthly payments for a year and a half. If the sales tax in Brian's area is 8.51%, how much did Brian pay in total? (Round all dollar values to the nearest cent.)
answer
d. $507.96
question
Paul paid $663 for a new freezer. He paid for the freezer with his credit card, which has an interest rate of 15.28% compounded monthly, and made monthly payments for five years until the freezer was paid off. He kept the freezer for seven years, and it used an average of $2.14 of electricity per week. Paul made no other purchases or payments with his credit card until the freezer was paid off. Between the interest and the electricity, which component of the lifetime cost of the freezer was greater, and how much greater was it? (Round all dollar values to the nearest cent.)
answer
c. The electricity cost $489.76 more than the interest.
question
Of the following, which statement or statements accurately represent possible effects of a long-term credit purchase on your credit score? I. Showing a willingness to pay high interest rates increases your score. II. Making only minimum payments for an extended time can hurt your score. III. Regularly paying off a credit balance can boost your score.
answer
c. II and III
question
Ellen purchased a dishwasher, which cost $315 before the 9.22% sales tax. She used the machine an average of 10 times per week for the next six years, at which point she replaced it. Each time she ran the dishwasher it cost her $0.09 for water and $0.13 for electricity. What was the lifetime cost of Ellen's dishwasher?
answer
a. $1,030.44
question
Kevin is looking at two brands of washing machines. Between water and electricity, a Brand C washer uses about $0.65 per load, and a Brand D washer uses about $0.27 per load. Kevin averages about five loads of laundry per month. After one year, how much more would the utility costs for a Brand C washer be than the utility costs for a Brand D washer?
answer
a. $22.80
question
Jenny used her credit card to buy a refrigerator with a base cost of $824. The refrigerator consumed an average of $0.09 in electricity every day. Jenny made regular monthly payments for three and a half years, at which point the refrigerator was paid off. Over the eight years that Jenny had the refrigerator, it needed repairs three times, costing $68.75 each time. If Jenny's credit card has an APR of 10.54%, compounded monthly, and sales tax in Jenny's area is 7.13%, what was the lifetime cost of Jenny's refrigerator? Assume that Jenny made no other purchases with her credit card, and round all dollar values to the nearest cent. (Remember that leap year occurs every four years.)
answer
not c. $1,779.63 NOT b. $1,622.46
question
From the statements below, identify the way or ways in which making only minimum monthly payments on a long-term credit purchase can be a disadvantage. I. It is illegal to make only the minimum payments for more than one year. II. Repeatedly making minimum payments harms your credit score. III. The total cost is higher if the length of the debt is longer.
answer
d. II and III
question
Olivia bought a $1,874 sprinkler system with her credit card. Her credit card has an APR of 10.31%, compounded monthly. She made no other purchases on the card until the sprinkler system was fully paid for, which took four years of identical monthly payments. Over the eight years that Olivia kept the sprinkler system, it used an average of $2.11 in water per week. After eight years, what percentage of the total lifetime cost of the system did the original price make up? (Round all dollar values to the nearest cent.)
answer
NOT c. 38.25%
question
Choose the most appropriate action for making a large purchase.
answer
NOT a. use a credit card with attractive perks and high interest
question
Nicole used her credit card to buy a $1,255 mattress. Her credit card has an APR of 11.56%, compounded monthly, and the mattress was the only purchase on the card. Nicole paid off the mattress after two and a half years. If the sales tax in Nicole's area is 9.08%, how much interest did Nicole pay in total? (Round all dollar values to the nearest cent.)
answer
NOT b. $456.20 NOT d. $327.86
question
You are considering buying one of two brands of barbecue grills. Brand F costs $650 and will last for about fifteen years. Brand G costs $200 and will last for about five years, so you will need to buy three of them over the years to equal one Brand F grill. In either case, you plan to pay for the grill with your credit card, which has an interest rate of 13.01%, compounded monthly. You will pay off a Brand F grill in five years of monthly payments, and you will pay off a Brand G grill in three years of monthly payments. Assuming that you have no other purchases on your credit card, over a fifteen-year period, which kind of grill will be cheaper, and how much cheaper will it be? (Round all dollar values to the nearest cent.)
answer
a. Brand G will end up costing $159.48 less than Brand F.
question
Of the following, which statement or statements accurately reflect a way in which credit can be safer than cash? I. If your credit card gets stolen, you can cancel it and get your money back. II. It is harder to lose a single credit card than a large number of bills. III. If a merchant does not honor the agreement, you can call the credit company and dispute the charges.
answer
a. I and III
question
Robert is looking to buy a deep fryer. He has narrowed his search down to two models. The following table gives the details of the prices, cost per use in electricity and oil, and lifespan of the two models Robert is considering to purchase. Robert plans on using his deep fryer about eight times per month. After six years, which brand will have the lower lifetime cost, and by how much?
answer
a. Brand P will be $118.26 cheaper than Brand Q.
question
Miles and Nick each separately apply for and receive loans worth $5,000 apiece. Miles has a very good credit score, so his loan has an APR of 7.75%, compounded monthly. Nick's credit score is rather low, so his loan has an APR of 13.10% interest, compounded monthly. If both of them repay their loans over a four year period, making equal monthly payments based on their own loan, how much more will Nick have paid than Miles? (Round all dollar values to the nearest cent.)
answer
NOT b. $267.50
question
Xavier is comparing the credit scores of people in his neighborhood. He compiled the scores he found into the table below. What is the median credit score in this group? (Round to the nearest whole point, if applicable.)
answer
a. 776
question
What is a credit report?
answer
b. A credit report is a detailed listing of your credit history.
question
Of the following statements, which one or ones describe actions harmful to your credit score? I. Owing a lot of money II. Having many lines of credit III. Making steady payments
answer
a. I and II
question
Of the following statements, which one or ones indicate possible effects of a low credit score? I. You will have a difficult time qualifying for loans. II. Any loans you take out will be relatively short-term. III. You will have to pay higher than average interest rates.
answer
d. I and III
question
Christine is reviewing her credit scores from the three major credit bureaus. Her Experian score is 775, her Equifax score is 721, and her TransUnion score is 760. What is Christine's median credit score? (Round to the nearest whole point, if applicable.)
answer
c. 760
question
Tony is a loan officer. He determines his clients' eligibility for loans and for good interest rates by using their credit scores. The scores of several clients are shown in the following table.
answer
b. Neil has the highest mean score, but Jeff has the highest median score.
question
You are a loan officer trying to decide which clients deserve your best rates. The table below shows the credit scores of several loan applicants.
answer
d. Lisa
question
Sophie did an anyonymous survey and collected her friends' credit scores. The scores she found are listed in the table below. What is the mean credit score in this group? (Round to the nearest whole point, if applicable.)
answer
a. 698
question
Which answer choice does not name one of the three national credit reporting agencies (also called credit bureaus)?
answer
c. TransAtlantic
question
Jessica's credit card is on a 30-day billing cycle, and it computes finance charges using the adjusted balance method. The following table details Jessica's use of her credit card in the month of October.
answer
b. $1,033.76
question
Yolanda's credit card has an APR of 16.22% and a billing cycle of 30 days. The table below shows her transactions with that credit card in the month of November. Date Amount ($) Transaction 11/1 857.14 Beginning balance 11/3 76.95 Purchase 11/10 50.00 Payment 11/24 43.19 Purchase Find Yolanda's finance charge in November using the previous balance method, the adjusted balance method, and the daily balance method. Among those three possible finance charges, what is the value of the one which is neither lowest nor highest?
answer
b. $11.59
question
Which method of calculating finance charge results in the lowest finance charge?
answer
d. adjusted balance
question
Calvin's credit card computes finance charges using the daily balance method. His card has a billing cycle of 30 days and an APR of 14.75%. The following table details Calvin's transactions in the month of September.
answer
c. $625.91
question
To minimize finance charges calculated by the daily balance method, when in the billing cycle is it best to make purchases and payments?
answer
c. Payments should be made early in the billing cycle, and purchases should be made late in the billing cycle.
question
Freida's credit card has an APR of 13.73%, and it calculates her finance charge by using the daily balance method and a 30-day billing cycle. On September 1st, Freida had a balance of $449.22. During the month of September, she made a payment of $85.33 and a purchase of $60.99. How much greater will her September finance charge be if the purchase occurred on September 7th and the payment occurred on September 20th than it would be if the payment occurred on September 7th and the purchase occurred on September 20th?
answer
c. $0.72
question
Patrick has a credit card with an APR of 15.40% and a billing cycle of 30 days. The following table shows Patrick's credit card transactions in the month of August. Date Amount ($) Transaction 8/1 1,466.22 Beginning balance 8/6 28.48 Purchase 8/9 150.00 Payment 8/17 115.75 Payment 8/20 40.00 Purchase 8/22 31.76 Purchase How much greater will Patrick's August finance charge be if his credit card company computes finance charges using the previous balance method than if it computes finance charges using the adjusted balance method?
answer
b. $3.41
question
Jerry has a credit card debt of $15,600 that he would like to reduce by applying $8,500 of his inheritance money to the balance. In addition, he would like to modify his debt payment plan to pay off the remaining balance in 24 months rather than 60 months. His credit card has an APR of 18%. How much will these changes save Jerry in finance charges (interest)?
answer
c. $6,760.96
question
Michelle has four credit cards with the balances and interest rates listed below. If Michelle wanted to pay off all four credit cards in 36 months, what would her total monthly credit card payment be?
answer
c. $475.67
question
Which of the following is not a step in creating a debt payment plan?
answer
b. Consolidate all credit cards onto a single card with a single interest rate.
question
Frank has four different credit cards, the balances and interest information of which are outlined in the table below. As Frank was developing a debt payment plan, Rick suggested that he pay off the credit cards beginning with the highest interest rate, working his way down. If Frank chooses to follow Rick's advice, in what order should Frank plan on paying off his credit cards?
answer
a. D, A, C, B
question
Which of the following is not something that will help you pay off credit card debt?
answer
d. Transfer existing credit card balances to credit cards with "low introductory rates."
question
Sarah has a credit card balance of $9,450 with an APR of 17%. With her current budgeted payment, Sarah will be able to pay off this debt in 36 months. But Sarah's best friend just invited her to spend two months in Europe with her in 9 months. Wanting to have her credit card balance paid off before she goes to Europe, Sarah decides to take on a second job. What additional monthly income will Sarah need in order to pay off her credit card in 9 months?
answer
c. $788.85
question
Cesar is excited that he only has 12 months left before he pays off his credit card completely. His current balance is $3,750 and his APR is 17.5%. But when he is involved in a car accident, he is forced to use his credit card to pay a $1,000 deductible to get his car fixed. How much will Cesar's minimum monthly payment increase if he still wants to pay off his credit card in 12 months?
answer
b. $91.44
question
Which step is not part of the 5-point credit card debt elimination plan?
answer
d. pay only the minimum amount on all credit cards
question
Tamari has a monthly income of $4,250 and she wants to determine her monthly net income. She calculates that her fixed expenses are $1,955 and her variable expenses are 28% of her monthly income. How much is Tamari's monthly net income?
answer
a. $1,105
question
Marcia has two credit cards and would like to consolidate the two balances into one balance on the card with the lower interest rate. The table below shows the information about the two credit cards Marcia currently uses.
answer
d. $227.40
question
Which of the following is least likely to be a warning sign that one's debt is at a critical point?
answer
b. having several credit cards
question
Charlene has a monthly salary of $3,410. With her present budget, Charlene has a net income that is 7% of her monthly salary. Charlene is going to reduce her net income by $125 each month and put this money towards paying down her debt. What will Charlene's new net income be?
answer
a. $113.70
question
Julius currently pays the minimum monthly payment of $34.15 on his credit card, which has a balance of $1,289. His credit card has an APR of 20%. If Julius wants to pay off the balance in 12 months, determine the monthly payments he needs to make. Choose the following modification with the least cuts to his current expenses that will allow Julius to pay off his credit card balance in 12 months.
answer
a. Julius can eliminate $31 from Entertainment and $55 from Food/Clothes.
question
A warning sign that a credit counseling agency may not be legitimate is when they promise to
answer
d. settle your debts without it hurting your credit rating
question
James has a balance of $1,230 on his credit card that has an APR of 24%. He currently pays the minimum monthly payment of $30.75. If James wants to pay off his balance in 18 months, determine the monthly payment he would need to make. Choose the following modification with the least cuts to his current expenses that will allow James to pay off his balance in 18 months.
answer
b. James can eliminate $25 from Food/Clothes and $27 from Entertainment.
question
Mikah buys a new DVD player. After 9 days, he sees the same player on sale at another store for considerably less than what he paid for his. Since he still has the receipt, he decides to return the DVD player, get his money back, and buy it at the cheaper price. When he tries to make the return, he is disappointed to find out that returns on electronics must be made within three days of purchase. Which of the following responsibilities did Mikah most likely not meet?
answer
b. know the return policy
question
Shaquil needs to borrow $400. The loan company charges him $80 in fees for the loan. Shaquil calculates that the annual percentage rate (APR) on his loan is 250%. Approximately what is the term of Shaquil's loan?
answer
b. 29 days
question
Dwayne had a balance of $95.13 in his checking account on Monday morning. That day he used his debit card for the following transactions: Breakfast at the corner bagel shop: $8.53 Gas in the car: $28.60 Cable bill: $65.39 Oil change: $30.64 Dwayne's bank uses a balance system of debiting from highest to lowest. The bank will not return amounts up to a total of $50 in overdrafts, but they do charge a fee for each overdraft. How many overdraft fees will Dwayne incur?
answer
c. 3
question
A company offering tax refund anticipation loans is trying to draw new customers. The company guarantees that the annual percentage rate on its loans is 39%. What fees would the company charge on a $1,200 loan if the term of the loan is 18 days? (Round to the nearest dollar).
answer
b. $23
question
Determine the annual percentage rate (APR) for a tax refund anticipation loan based on the following information. (Round to the nearest percent.) amount of loan = $985 total fees paid = $135 term of loan = 10 days
answer
d. 500%
question
Dynatashia has a list of items she needs to buy at the store. She has written down the items and the advertised prices as shown: Hamburger - $3.99 per pound Hamburger buns - $1.29 2-liter soda - 3 for $2.00 Dynatashia buys 1.5 pounds of hamburger, 1 package of buns and 3 of the 2-liter bottles of soda. Her receipt is shown below.
answer
d. No, Dynatashia paid too much for buns.
question
How is the interest rate on a payday loan calculated?
answer
b. total fees divided by loan amount
question
Based on a $500 loan amount, rank the following companies from the lowest to highest annual percentage rate (APR).
answer
a. A, B, C, D
question
Barbara got a flat tire and does not have a spare. She needs her car for work, so she goes to a business that offers payday loans in order to get the money to buy a new tire. She borrows $75 and plans to pay it back when she gets paid in 8 days. Barbara is charged a fee of $15 and the term on her loan is 8 days. Approximately what is the annual percentage rate on her loan?
answer
c. 913%
question
Which part of the decision-making process is directly related to brainstorming?
answer
c. generating possible options
question
Natasha is a regional manager for a chain of supermarkets. She has been tasked with researching the weekly sales records of two branch locations over the past month, which she must present to her board of directors. She was able to assemble the relevant information in the table below, but it is scrambled and hard to read. Sales are listed in thousands of dollars.
answer
a. I
question
You are the manager of a clothing store. You must decide how many of your employees to put on the sales floor, and how many to put on the register. Because employees on the sales floor cause customers to buy more products, if you do not have at least 2 employees on the register for every 5 employees working on the sales floor, your registers will get very clogged and you will lose business. You have a total of 84 employees, and you wish to have as many on the sales floor as possible. How should you divide your employees?
answer
c. 60 on the sales floor, 24 on the register
question
The following graph shows Caroline's sales records since she started her position 22 months ago.
answer
b. Morris will only see a rapid drop in performance, while Shawna knows that Caroline is usually a solid salesperson and that her lapses never last long.
question
Which of the following is not a way Ian Dicker claims a Business Intelligence Dashboard will help you to make good business decisions?
answer
a. allowing five different methods with which to monitor your business
question
It is the policy of stores owned by the Talkara Co. to give out bonuses to salespeople every six months. The size of the bonus is determined by averaging (taking the mean of) the two highest and the lowest monthly sales totals from the six-month period, taking 8% of the result, and splitting it evenly among the salespeople. The graph below shows sales for the most recent bonus period.
answer
c. $324
question
Which of the following is a pair of events which are dependent on one another?
answer
b. drawing a pair of cards from a deck
question
You are the manager of a retail store, and you have been tasked with finding the return rate on a certain brand of laptop computers. You have assembled the data on the number of computers sold and the number returned over the past six months in the table below. Month Oct Nov Dec Jan Feb Mar Sold 1,621 1,752 1,848 1,634 1,725 1,780 Returned 223 415 421 560 330 304 Using the table as experimental data, if your store has 379 laptops returned in April, how many laptops are likely to have been sold in April?
answer
c. 1,743
question
All of the following are considerations in analyzing risk except which answer choice?
answer
c. interviewing the manager on duty during a disaster
question
Perry is considering trying to open a new business within the next few years, and he is doing research to determine what kind of businesses tend to be successful. So far, he has compiled two tables. The first shows the number of businesses of several types started in Perry's city over the course of two years, and the number of those businesses which did not succeed and were forced to shut down within two years of opening. The second deals with separate records of successful new businesses, showing how much profit those new businesses turned over two years. Businesses on the boundary lines fall in the lower category. Type Food Retail Financial Service Opened 3,193 2,280 1,898 5,045 Closed 1,977 1,626 1,443 3,548 Up to $25k $25-50k $50-75k $75-100k Over $100k Food 945 623 601 258 114 Retail 813 548 347 188 63 Financial 316 244 195 86 51 Service 979 739 432 174 124 Using the tables as experimental data, determine whether it is more likely for a new food establishment to succeed and earn up to $25,000, or whether it is more likely for a new financial establishment to succeed and earn profits in either the $25,000-50,000 range or the $50,000-75,000 range, and how much more likely the one situation is than the other. Express all probabilities as percentages to two decimal places, and express differences by number of percentage points (for example, 23% is 5 percentage points greater than 18%).
answer
d. The situation involving the food establishment has a probability 2.36 percentage points higher than the situation involving the financial establishment.
question
Harold randomly selected one square tile and one round tile from the sets shown below. What is the probability that Harold selected a pink square tile, and either a red or a blue round tile?
answer
c. 1/9
question
Say that you put the set of tiles shown below into a bag and conduct a series of trials in which you draw one tile randomly from the bag, record the color, and replace it. The table below shows the number of times in each set of trials that you drew a blue tile. 2007-16-04-00-00_files/i0120000.jpg Trial 1 2 3 4 5 # of Draws 54 36 80 22 75 # of Blues 18 11 20 4 32 Between the theoretical probability that you will draw a blue tile and the experimental probability that you will draw a blue tile, which is greater, and how much greater is it? Express all probabilities as percentages to two decimal places, and express differences by number of percentage points (for example, 12% is 2 percentage points greater than 10%).
answer
c. The experimental probability is 4.06 percentage points greater than the theoretical probability.
