amer-13

Card Set Information

Author:
SAngell3
ID:
227421
Filename:
amer-13
Updated:
2013-07-17 13:47:47
Tags:
amer 13
Folders:

Description:
amer-13
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user SAngell3 on FreezingBlue Flashcards. What would you like to do?


  1. Although consumers are important users of funds in the U.S. financial system, they are relatively unimportant suppliers (lenders) of funds to the system.

    a) True
    b) False
    b) False

    • U.S. consumers are important users of funds in the financial system. They are also the most important category of lenders or suppliers of funds to the system.
    •  
  2. A NOW account is basically a noninterest-bearing savings account offered by banks and thrift institutions.

    a) True
    b) False
    b) False

    A NOW account is basically an interest-bearing checking account.
  3. One of the principal functions of an automatic transfer service (ATS) provided by a financial institution is to minimize the amount of a customer's money that does not earn interest.

    a) True
    b) False
    a) True

    As checks are presented for payment, funds can be transferred from an interest-earning savings account to a checking account to cover the checks.
  4. Consumer installment credit is the largest category of debt owed by U.S. households at the present time.

    a) True
    b) False
    b) False

    The largest category of debt owed by U.S. households at the present time consists of home mortgages.
  5. Customers who generally maintain large credit card unpaid balances from the purchase of major items are referred to as noninstallment users.

    a) True
    b) False
    b) False

    Customers who purchase major items through credit cards and generally maintain large unpaid credit card balances are referred to as installment users because they pay only a portion of their outstanding balance each month. Noninstallment users generally utilize the credit card simply as a substitute for cash and pay off the full balance each month.
  6. Unlike a credit card, a debit card involves paying for an item at the time it is purchased.

    a) True
    b) False
    a) True

    A debit card transaction involves the immediate transfer of funds from the buyer's account to that of the seller without an extension of credit.
  7. The volume of outstanding consumer borrowing in the United States generally expands during an upswing of the business cycle and contracts during a downswing.

    a) True
    b) False
    a) True

    The relationship between the volume of consumer borrowing outstanding and the business cycle is direct: both move in the same direction.
  8. In the real estate mortgage lending field, commercial banks generally prefer to provide short-term construction financing rather than making long-term loans for family housing.

    a) True
    b) False
    a) True

    Commercial banks prefer to hold short-term liquid loans rather than long-term illiquid mortgages since most of their liability deposits are short term.
  9. When evaluating an application for a loan, consumer loan officers in banks prefer to extend credit to those who evidence "pyramiding of debt," that is, borrowing from one financial institution to pay off another.

    a) True
    b) False
    b) False

    Consumer loan officers frequently refuse a loan to those who evidence pyramiding of debt.
  10. One of the main provisions of the Consumer Credit Protection Act of 1968 (Truth-in-Lending Act) is a limitation on the interest rate financial institutions may charge on consumer loans.

    a) True
    b) False
    b) False

    The Truth-in-Lending Law requires lenders to provide certain information about the credit contract in terms that are understandable so that the consumer can make an intelligent decision about whether to borrow. It does not tell lenders how much interest they may charge.
  11. An important purpose of the Community Reinvestment Act of 1977 was to induce financial institutions to make positive efforts to meet the credit needs of low-income customers.

    a) True
    b) False
    a) True

    The act was designed to promote affirmative action to provide loans to low-to moderate-income customers.
  12. Filing for bankruptcy under Chapter 7 normally establishes a debt-repayment plan.

    a) True
    b) False
    b) False

    Filing under Chapter 7 normally discharges all of a household's unsecured debts.
  13. Conventional mortgage loans frequently are insured.

    a) True
    b) False
    a) True

    Most conventional mortgage loans are privately insured.
  14. Credit unions are clearly the largest type of private mortgage-lending institutions in the residential mortgage-lending field in the United States.

    a) True
    b) False
    b) False  

    Commercial banks are the principal private mortgage-lending institutions, and savings and loan associations rank second. Credit unions have a very small share of this market.
  15. Savings banks provide most of their mortgage credit for the purchase of residential properties rather than commercial properties such as shopping centers and office buildings.

    a) True
    b) False
    a) True

    Savings banks prefer residential mortgage investments to commercial mortgage investments.
  16. Mortgage banking firms serve as intermediaries between real estate builders and developers and long-term institutional investors.

    a) True
    b) False
    a) True

    Mortgage bankers assemble mortgages for placement with long-term investors such as insurance companies who wish to hold the mortgages as investments.
  17. A major purpose of the Federal National Mortgage Association (Fannie Mae) is to provide government guarantees to mortgage-lending institutions.

    a) True
    b) False
    b) False

    The chief purpose of Fannie Mae is to buy and sell existing mortgages, thus helping to create an active secondary market for these loan instruments.
  18. The Government National Mortgage Association (Ginnie Mae) exists primarily to finance housing for middle-income families at below-market interest rates.

    a) True
    b) False
    b) False

    Although one of the purposes of Ginnie Mae is to finance housing for low-income (rather than middle-income) families at below-market interest rates, its more important purpose is to guarantee securities issued by private mortgage institutions if the securities are backed by pools of government-guaranteed mortgages.
  19. In times of rising interest rates, the presence of a large volume of fixed-rate mortgages in a thrift institution's portfolio acts to squeeze its profits.

    a) True
    b) False
    a) True

    When interest rates rise, the cost of funds to thrift institutions increases while the interest earnings on their fixed-rate mortgage portfolio stay the same.
  20. Interest-only mortgages reduce risk to borrowers by reducing the amount of their periodic payment.

    a) True
    b) False
    b) False

    Interest-only loans are one of the most risky mortgages available. Unfortunately, after the initial interest-only period, both principal and interest must be paid, and this is accompanied by very large increases in monthly payments.
  21. The Consumer Credit Protection Act of 1968 (Truth-in-Lending) provides which of the following? 

    a) a specified maximum rate of interest that may be charged on consumer loans    b) a 2-week right of rescission on all consumer loans   
    c) a right of consumers to have access to their credit files   
    d) a requirement that the lender disclose the annual percentage rate (APR) of interest charged on the loan
    • d) a requirement that the lender disclose the annual percentage rate (APR) of interest charged on the loan
    •  

    The act requires full disclosure, but it does not set a maximum rate of interest that may be charged.

    The right of rescission, which lasts only 3 days, applies only to certain loans in which the borrower's home is pledged as collateral.

    • The Fair Credit Reporting Act of 1970 is the act that gives consumers the right to access their credit files.
    •  
  22. Which of the following is a variable-rate home mortgage loan that allows the borrower to switch to a fixed-rate mortgage later if interest rates look more favorable to the borrower?

    A) an adjustable-mortgage instrument 
    B) a reverse-annuity mortgage
    C) a graduated-payment mortgage
    D) a convertible-mortgage instrument
     
    D) a convertible-mortgage instrument

    An adjustable mortgage instrument is one that permits changing the loan principal, maturity, or monthly payment.

    A reverse-annuity mortgage is a device for drawing the equity out of a home whose original mortgage has been paid off.

    A graduated payment mortgage is one in which the payments in the early years are low, then begin to increase and finally level off several years later.
     
    (this multiple choice question has been scrambled)
  23. Which of the following statements concerning the Federal National Mortgage Association (FNMA) is (are) correct?

    I. It was created in the 1980s.

    II. It purchases and sells only conventional mortgage loans.Answer   

    A) I only   
    B) II only   
    C) Both I and II   
    D) Neither I nor II
    D) Neither I nor II

    I is incorrect because the Federal National Mortgage Association was created in 1938.

    II is incorrect because it currently purchases and sells both government-insured and conventional mortgages.
     
    (this multiple choice question has been scrambled)
  24. Which of the following statements concerning the roles of consumers in the U.S. financial system is (are) correct?

    I. Consumers are among the most important borrowers of funds in the U.S. financial system.

    II. Consumers are among the least important suppliers (lenders) of funds in the U.S. financial system.

    A) Neither I nor II
    B) Both I and II   
    C) I only   
    D) II only   
    C) I only

    II is incorrect because consumers as a group are the most important suppliers of funds in the U.S. financial system.
    (this multiple choice question has been scrambled)
  25. All the following statements concerning home-equity loans are correct EXCEPT

    a) A home-equity loan usually consists of a rearranged revolving credit line.   
    b) The borrowing base on a home-equity loan is usually the difference between the home's appraised market value and the purchase price of the home.   
    c) The interest rate charged on a home-equity loan usually is above the lending bank's prime rate.   
    d) The interest on a home-equity loan usually is tax-deductible for the homeowner for federal income tax purposes.
    b) The borrowing base on a home-equity loan is usually the difference between the home's appraised market value and the purchase price of the home.   

    • The following base typically is some percentage, such as 70 percent, of the difference between the appraised value of the home and the unpaid mortgage balance on it.
    •  
  26. All of the following are requirements imposed on the lender by the Consumer Credit Protection Act of 1968 EXCEPT

    A) It limits the ability of the lender to garnish wages.
    B) It gives consumers the right to cancel a credit agreement within three days under certain circumstances.
    C) It requires lenders to disclose interest charges in a uniform manner.
    D) It sets maximum interest rates on various types of loans
    D) It sets maximum interest rates on various types of loans

    It does not set maximum rates.
     
    (this multiple choice question has been scrambled)

What would you like to do?

Home > Flashcards > Print Preview