Chapter 3

Question 1

cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan

Answer 1

annual percentage rate (APR)

Question 2

an amount of money placed at a person’s disposal by a bank; money owed

Answer 2

credit

Question 3

type of card issued by a bank that allows users to finance a purchase

Answer 3

credit card

Question 4

preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments

Answer 4

debt snowball

Question 5

an interest rate charged for a customer during the early stages of a loan; the rate often goes up after a specified period of time

Answer 5

introductory rate

Question 6

time frame that a loan agreement is in a force, and before or at the end of which the loan should either be repaid or renegotiated for another term

Answer 6

loan term

Question 7

—— percent of Americans are living paycheck to paycheck

Answer 7

70

Question 8

When it comes to debt, if you spread a ______ or a lie long enough, it eventually becomes accepted as the _____.

Answer 8

myth, truth

Question 9

Debt has been _______ to us with such intensity for so long that to imagine living without it requires a complete ______ shift, a completely new way of looking at things.

Answer 9

marketed, paradigm

Question 10

your belief system; the way you see or perceive things

Answer 10

paradigm

Question 11

a long-term rental agreement; a form of second long-term debt

Answer 11

lease

Question 12

expense that a taxpayer is allowed to deduct from taxable income; examples include money paid as home mortgage interest and charitable donations

Answer 12

tax deduction

Question 13

a decline in the value of property; the opposite of appreciation

Answer 13

depreciation

Question 14

mortgage in which the interest rate changes periodically (I.e. annually); a way for banks to transfer the risk of higher interest rates to

Answer 14

adjustable rate mortgage (ARM)

Question 15

home loan in which the sum of the monthly payments is insufficient to repay the entire loan; a final payment comes due, which is a lump sum of the remaining principal

Answer 15

balloon mortgage

Question 16

the process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the

Answer 16

foreclosuer

Question 17

a card that often bears the seal of a major credit card company, issued by a bank and used to make purchases; unlike a credit card, the money comes directly out of a checking account

Answer 17

debit card

Question 18

time period during which a borrower can pay the full balance of credit due with no finance charges

Answer 18

grace period

Question 19

credit line offered by mortgage lenders that allows a homeowner to borrow money against the equity in their home

Answer 19

home equity loan (HEL)

Question 20

act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt

Answer 20

debt consolidation

Question 21

MYTH: If I _________ money to a friend of relative, I will be helping them

Answer 21

loan

Question 22

TRUTH: The relationship will be strained or __________

Answer 22

destroyed

Question 23

MYTH: By _______ a loan, I am helping out a friend or relative.

Answer 23

cosigning

Question 24

TRUTH: The bank requires a cosigner because the person isn’t likely to _______. Be ready to pay the loan and have your credit damaged.

Answer 24

repay

Question 25

MYTH: _________, payday lending, rent to own, title pawning, and tote the note lots are needed __________ for lower income people to help them get ahead.

Answer 25

Cash advance, services

Question 26

TRUTH: These are horrible, greedy ripoffs that aren’t needed and benefit no one but the owners of these _________.

Answer 26

companies

Question 27

80% of __________ in America are first-generation rich. That means they started out with nothing, did smart stuff, and became millionaires. That’s the opposite of what we’re talking about here.

Answer 27

millionaires

Question 28

MYTH: The _______ and other forms of gambling will make me _____.

Answer 28

lottery, rich

Question 29

TRUTH: The lottery is a ____ on the poor and on people who can’t do math.

Answer 29

tax

Question 30

Texas Tech University did a study on the Texas lottery and found that people without a high school diploma spent an average of $____ a month playing the lottery. College graduates spend $____ a month on average.

Answer 30

173, 49

Question 31

When studies are done on the lottery, it’s always the lower-income ZIP codes that generate the _____ revenue or sales.

Answer 31

highest