Sharon is considering the purchase of a car. After making the down payment, she will finance $15,500. Sharon is offered three maturities. On a four-year loan, Sharon will pay $371.17 per month. On a five-year loan, Sharon’s monthly payments will be $306.99. On a six-year loan, they will be $264.26. Sharon rejects the four-year loan, as it is not within her budget. How much interest will Sharon pay over the life of the loan on the five year loan? On the six-year loan? Which should she choose if she bases her decision solely on total interest paid
> How might you eliminate the annual fees that are charged by some credit cards?
> What is a credit limit? How can you increase your credit limit?
> Paul’s credit card closes on the 3rd of the month, and his payment is due on the 30th. If Paul purchases a stereo for $300 on June 12th, how many interest-free days will he have? When will he have to pay for the stereo in full in order to avoid finance c
> Chen recently graduated from college and accepted a job in a new city. Furnishing his apartment has proved more costly than he anticipated. To enable him to make purchases, he applied for and received a credit card with a $5,000 credit limit. Chen planne
> Eileen (from question 7) wants a car that costs $12,000. How long would it have taken Eileen to save for the outright purchase of the car if she did not have any credit card debt and used the interest payments to save for the purchase of the car? Eileen
> Troy has a credit card that charges 18% on outstanding balances and on cash advances. The closing date on the credit card is the first of each month. Last month Troy left a balance on his credit card of $200. This month Troy took out a cash advance of $1
> Margie has had a tough month. First, she had dental work that cost $700. Next, she had her car transmission rebuilt, which cost $1,400. She put both of these unexpected expenses on her credit card. If she does not pay her credit card balance when due, sh
> Chrissy currently has a credit card that charges 15% interest. She usually carries a balance of about $500. What will her total annual interest be with her current card?
> List and briefly discuss the factors that affect an individual’s life insurance premium.
> What are three advantages of using a credit card? Can you think of any disadvantages?
> Why should you review your credit card statement before paying the bill? What steps should you take if you discover an error?
> Explain why getting a cash advance on your credit card is a costly source of funds.
> Explain how the Credit CARD Act changed the way credit card issuers assess late fees.
> What is overlimit protection? Explain why consumers should use this feature sparingly.
> How does a secured credit card differ from a standard credit card? Under what circumstances would you need a secured credit card?
> Describe the role of the Consumer Financial Protection Bureau.
> Describe some of the key provisions of the Credit CARD Act.
> Explain how you can impose your own limits on credit card spending.
> What are the three methods used by financial institutions to calculate finance charges on outstanding credit card balances? Briefly describe how interest is computed under each method.
> Describe the budget method to determine the amount of life insurance needed. What elements must be considered in making this calculation?
> Why is paying your credit card balance in full so important? What should you do if you can’t avoid credit card debt? Explain.
> List five tips for using credit cards wisely.
> What should you consider when comparing credit cards?
> List some items that appear on the credit card statement. What accounts for the difference between your previous balance and your new balance?
> How does the interest rate affect your credit payments? What is meant by simple interest? What is the annual percentage rate (APR), and when is it used?
> What is a cash advance? How are they commonly obtained? Discuss interest rates and grace periods with regard to cash advances.
> What is a grace period? How can you use it to your advantage?
> Discuss how credit cards offer incentives to use the cards. How else might credit card companies reward cardholders with excellent credit ratings?
> Describe the differences between a credit card like MasterCard or Visa and a retail (or proprietary) card. How do credit and retail cards generate revenue? What is the biggest disadvantage of a proprietary card?
> Brad Brooks is pleased with your assistance in preparing his personal financial statements and your suggestions for improving his personal financial situation. He has called you for additional guidance. First, he wants to know what factors he should cons
> Discuss why life insurance needs should not be based on a family’s dreams for the future.
> What are some of the risks associated with investing in real estate?
> Brad Brooks is pleased with your assistance in preparing his personal financial statements and your suggestions for improving his personal financial situation. He has called you for additional guidance. First, he wants to know what factors he should cons
> Brad Brooks is pleased with your assistance in preparing his personal financial statements and your suggestions for improving his personal financial situation. He has called you for additional guidance. First, he wants to know what factors he should cons
> Brad Brooks is pleased with your assistance in preparing his personal financial statements and your suggestions for improving his personal financial situation. He has called you for additional guidance. First, he wants to know what factors he should cons
> What credit restrictions apply to persons under age 21?
> How are payments calculated under the add-on interest method?
> How does the maturity of a loan affect the monthly payments? What should you consider when selecting the maturity?
> What does the personal loan process involve?
> Explain when you might use a deferment on student loans. What are the disadvantages of deferring student loans?
> How does a prepayment penalty impact your decision to pay a loan off early?
> How can borrowers enjoy tax savings by using a home equity loan? How are these tax savings computed?
> Describe the income method to determine the amount of life insurance needed. What is the disadvantage of this method?
> What should be the first step in financing a purchase of a car? Aside from the interest rate, what two factors will have the largest impact on the size of your monthly payment?
> Beth has just borrowed $5,000 on a four-year loan at 8% simple interest. Complete the amortization table at the bottom of the page for the first five months of the loan. Beginning Balance Payment Amount Applied to Interest Appled to Principal Paymen
> Fritz and Helga work for a local manufacturing company. Since their marriage five years ago they have been working extensive overtime, including Sundays and holidays. Fritz and Helga have established a lifestyle based on their overtime earnings. Recently
> John and Cheryl just borrowed $30,000 on a home equity line of credit. The interest rate for the loan is 6.75% for the entire year, and they took out the loan on May 1. John and Cheryl are in the 28% tax bracket. What will be their tax savings for the fi
> Bill wants to purchase a new car for $45,000. Bill has no savings, so he needs to finance the entire purchase amount. With no down payment, the interest rate on the loan is 13%, and the maturity of the loan is six years. His monthly payments will be $903
> Refer to question 5. If Sharon had been able to afford the four-year loan, how much interest would she have saved compared to the five-year loan? Data from Question 5: Sharon is considering the purchase of a car. After making the down payment, she will
> If Beth had taken the same loan as an add-on interest loan, how would her payments differ? Why is there a difference?
> Eileen is a college student who consistently uses her credit card as a source of funds. She has maxed out her credit card at the $6,000 limit. Eileen does not plan on increasing her credit card balance any further, but has already been declined for a car
> Jarrod has narrowed his choice to two credit cards that may meet his needs. Card A has an APR of 21%. Card B has an APR of 14% but also charges a $25 annual fee. Jarrod will not pay off his balance each month, but will carry a balance forward of about $4
> What is variable life insurance? What are the advantages and disadvantages of variable life policies? How can individuals avoid the high fees of variable life insurance?
> You just borrowed $7,500 and are charged a simple interest rate of 8%. How much interest do you pay each year?
> What information will you need to supply when applying for credit? What kinds of attributes are creditors looking for? Do you need to have all these attributes to get credit?
> The Sampsons have been carrying a balance of about $2,000 on their credit card. They have been paying the minimum amount due and have been using any excess net cash flows to implement their new savings plan for a new car and their children’s college educ
> The Sampsons have been carrying a balance of about $2,000 on their credit card. They have been paying the minimum amount due and have been using any excess net cash flows to implement their new savings plan for a new car and their children’s college educ
> What are payday loans? Why should you avoid payday loans as a source of funds?
> What type of information is contained in the Buyers Guide?
> Explain the advantages and disadvantages of buying a new car instead of a used car.
> What is peer-to-peer lending? What are the advantages of a peer-to-peer loan?
> Why may a weak economy cause the limit on your home equity line of credit to decline? Why may a strong economy cause the limit on your home equity line of credit to rise?
> How are interest rates calculated for the two types of home equity loans? Why do borrowers prefer home equity loans to other loans?
> What is universal life insurance? How does it differ from term life and whole life?
> Discuss the two ways financial institutions might define equity to set credit limits. What happens if you default on a home equity loan?
> What is home equity? Describe how home equity loans work.
> Who extends student loans? What are the characteristics of student loans?
> What are the advantages and disadvantages of leasing a car? Give some advice for someone considering leasing.
> Describe some techniques that car salespeople might use in negotiating the price of the car. What should you be aware of at “nohaggle” dealerships?
> Why is purchasing a new car online not as efficient as buying a new car at a dealership?
> List the steps in buying a car. What financial criteria should be considered? Discuss each briefly.
> Why are loan payments under the simple interest method usually lower than loan payments under the add-on interest method?
> What is simple interest? What information is needed to compute it? What information is contained in a loan repayment schedule?
> What is the purpose of the annual percentage rate measurement? Could lenders with the same interest rates report different APRs?
> Why is the premium paid for whole life higher than the premium for term life? What alternative approach to purchasing life insurance might provide the same benefits as whole life?
> What are your responsibilities if you cosign a loan? What are the potential consequences of failing to live up to your responsibilities as a cosigner?
> Explain the difference between a 10% rate charged on a payday loan and a 10% rate charged by a bank on a personal loan.
> Explain how collateral works. Do all loans have collateral? What is the relationship between collateral and interest rates?
> What information is included in a loan contract? How is the amount of the loan determined?
> What information must borrowers supply to lenders in the loan application process? Why is this information important to lenders?
> What does it mean if a loan is amortized? What do the loan payments represent?
> List some possible sources of personal loans. What precautions should be taken with loans from family members or friends?
> What are some viable alternatives to payday loans?
> Noel has a 15% marginal tax rate. If he pays $1,400 in interest on a home equity loan in the first year, what are his tax savings?
> Refer to question 8. What will Mary and Marty’s credit limit be if the bank uses the market value of equity to determine their credit limit and will loan 70% of the equity? Data from Question 8: Mary and Marty are interested in obtaining a home equity
> Describe the nonforfeiture and loan clauses of whole life insurance policies.
> Mary and Marty are interested in obtaining a home equity line of credit. They purchased their house five years ago for $125,000, and it now has a market value of $156,000. Originally, Mary and Marty paid $25,000 down on the house and took out a $100,000
> Tracy is borrowing $8,000 on a six-year, 11%, add-on interest loan. What will Tracy’s monthly payments be?
> Susan recently quit working for a local firm and has yet to find a new job. She knows she can maintain her health insurance from her old employer due to COBRA. How much will it likely cost her for health insurance if she previously paid $100 per month an
> Christine’s total monthly expenses typically amount to $1,800. About $50 of these expenses are work related. Christine’s employer provides disability insurance coverage of $500 per month. How much individual disability insurance should Christine purchase
> Pete’s health insurance policy specifies that he should pay 30% of expenses associated with a long-term illness, and he has a stop loss provision of $35,000 in his policy. If Pete incurs expenses of $70,000, how much would he owe?
> A PPO uses a discount on charge arrangement. Marie incurred total charges by a hospital of $20,000, and the percentage paid to the provider is 70%. Marie’s contract with the PPO specifies her copay as 20%. How much does Marie have to pay?
> When the Sampsons purchased a home, they obtained a 30-year mortgage with a fixed interest rate of 8.6%. Their monthly mortgage payment (excluding property taxes and insurance) is about $700 per month. Today, they could obtain a 30-year mortgage with an
> As the next step in reviewing their finances, the Sampsons are assessing their insurance needs related to their vehicles and home. They indicated the amount of money they spend on insurance on their personal balance sheet in Chapter 2. They currently ha
> As the next step in reviewing their finances, the Sampsons are assessing their insurance needs related to their vehicles and home. They indicated the amount of money they spend on insurance on their personal balance sheet in Chapter 2. They currently ha
> What do the terms round lot and odd lot mean in stock transactions?
> What is whole life insurance? What benefit does it provide that term life insurance does not?
> Why should young people have investments in stocks as part of their portfolio?
> What factors should you consider when selecting which stockbroker to use?
> When performing an economic analysis of stocks, what economic factors are most closely watched?
