exam 2 Flashcards
An advantage credit unions may have over other financial institutions is:
lower loan rates
Which savings plan is not covered by federal deposit insurance?
Money market fund with an investment company
interest-earning account
usually requires minimum balance
Based on the following information, what amount would be subtracted from the bank statement side of the bank reconciliation? ATM withdrawal $20; Outstanding checks $154; Interest $1.25; Deposit in transit $75.
$154.00
A $200 savings account that earns $8.50 interest in a year has a yield of
4.25%
$8.50/$200 = 0.0425 = 4.25%
One example of closed-end credit is:
a mortgage loan
The Five Cs of Credit Management
- Character – borrower’s attitude toward credit obligations
- Capacity – financial ability to meet credit obligations
- Capital – assets or net worth
- Collateral – asset that you pledge to financial institution to obtain loan
- Conditions – general economic conditions that can affect ability to repay loan
Jane Calvert is applying for a loan from a bank. The bank knows she owns a house worth $160,000 and a car with a trade-in value of $12,000 as well as other personal assets worth approximately $44,000. Which one of the 5 Cs of credit is the bank looking at?
Capital
The debt payments-to-income ratio is:
calculated by dividing monthly debt payments (excluding mortgage payments) by net monthly income.
The market value of Karen’s home is $120,000 and the balance on her mortgage loan is $80,000. The lender has agreed to let her borrow up to 75% of the total value of her home less the mortgage. How much can she borrow with a home equity loan?
$10,000
($120,000 ×75%) -$80,000 = $90,000 –$80,000 = $10,000.
sources that provide data to credit bureaus include
banks, finance companies, credit card companies, court records
Which is NOT a source that provides data to credit bureaus?
Internal Revenue Service
What is included with a credit card application?
- minimum interest charges
- annual percentage rate for purchases
- penalty fees
- method used to calculate balance
If you borrow $150 at 10 percent interest, how much will you repay in one lump-sum at the end of one year using simple interest?
$165
P + I = P + (P × r × T) = $150 + ($150 × 0.10 × 1 year) = $150 + 15 = $165.
Jerrod Dean starts the month with a balance on his credit card of $800. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $300. The bank charges 1.5 percent interest per month using the adjusted balance method (and excludes new purchases). What would Jerrod’s finance charges be for the month?
$7.50
800 − 300 = 500;
500 × 1.5% = $7.50.
Jerry Allison starts the month with a balance on his credit card of $800. On the 10th day of the month, he purchases $200 in clothes with his credit card. On the 15th day of the month he makes a payment on his credit card of $300. The bank charges 1.5 percent interest per month using the previous balance method. What would Jerry’s finance charges be for the month?
$12
800 × 1.5% = $12.00.
Henry Garrison starts the month with a balance on his credit card of $800. The average daily balance for the month including purchase is $683. The average daily balance for the month excluding new purchase is $550. The bank charges 1.5 percent per month and uses the average daily balance including new purchases method. What would Henry’s finance charges be for the month?
$10.25
683 × 1.5% = $10.25.
The first phase of the consumer buying process involves:
identifying the problem
Federal Trade Commission (FTC) regulations require that:
used car buyers be informed of whether or not the vehicle comes with a warranty.
A used car sold “as is” has:
an implied warranty of merchantability
mediation
The process of resolving conflicts between a customer and a business with the use of a third party whose recommendations are nonbinding
Which is the largest fixed expense associated with a new automobile?
depreciation
P + I =
P + (P × r × T)
Trust
legal agreement that provides for the management and control of assets by one party for the benefit of another.
Asset management account
All-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management account.
Automatic teller machine (ATM)
computer terminal used to conduct banking transactions; also called a cash machine.
Debit card
plastic access card used in computerized banking transactions; also called cash card.
Commercial bank
financial institution that offers a full range of financial services to individuals, businesses, and government agencies.
Savings and loan association (S&L)
financial institution that traditionally specialized in savings accounts and mortgage loans.
Mutual savings bank
financial institution that is owned by depositors and specializes in savings accounts and mortgage loans.
