Personal Finance Test 3
Spring 2008
Chapters 8-9
Chapter 8 Consumer Purchasing Strategies and Legal Protection
True/False Questions
TF1.Store-brand products are usually inferior in quality compared to national and store-brand items.
TF2.An implied warranty is usually in written form.
TF3.Service contracts are usually included in the cost of appliances and other high-priced items.
TF4.Most consumer complaints are the result of poorly manufactured products.
TF5.Most consumer complaints need legal action to be resolved.
TF6.Mediation involves a legally binding decision by a third party to solve a consumer complaint.
TF7.Representation by a lawyer is usually required in small claims court.
TF8.A class action suit allows many people with the same complaint to take action as a group.
T F 9.Unit pricing uses a standard unit of measurement to compare prices of packages
of different sizes.
T F 10.A limited warranty covers all aspects of the product and does not require the
buyer to incur any of the costs for shipping and repairs.
Multiple Choice Questions
11.The first step of the consumer buying process is:
A)gathering information.
B)evaluating alternatives.
C)identifying the problem.
D)researching alternatives.
E)selecting the buying location.
12.The highest consistency of quality is associated with ______brand items.
A)generic
B)national
C)regional
D)store
E)manufacturer
13.A 32-ounce package selling for $1.60 would have a unit price of:
A)$1.60.
B)$2.00 a pound.
C)5¢ an ounce.
D)80¢ a quart.
E)12¢ an ounce.
14.Which of the following types of warranties is a specific agreement created by the seller or manufacturer?
A)express
B)implied
C)full
D)contingent
E)limited
15.Howard Ramsell recently became aware of implied warranties that exist for consumer purchases. An implied warranty exists as a result of:
A)a stated intent of the seller.
B)actions by consumers.
C)the intended use of a product.
D)rulings of federal consumer agencies.
E)a written statement from the manufacturer.
16.The major criticism of service contracts is:
A)poor service from repair companies.
B)limited coverage of repairs.
C)weak government regulation of service contract companies.
D)high costs and a low chance of need.
E)that few places are available for repairs.
17.Most consumer complaints are resolved by:
A)legal action.
B)assistance from a government agency.
C)contacting a company's headquarters.
D)returning to the place of purchase.
E)obtaining help from an action line.
18.The purpose of small claims court is to:
A)regulate fair business activities.
B)provide hearing on proposed consumer protection laws.
C)allow consumers with similar complaints to take action as a group.
D)resolve minor consumer complaints.
E)assist low-income consumers who need legal help.
19.Small claims court requires a person to have:
A)written testimony.
B)a case involving less than a set amount.
C)representation by an attorney.
D)evidence screened in advance of the hearing
20.Recently, Jim Dahl was on a bus tour in a mountain area. The bus broke down forcing the group to stay overnight. Group members had to pay for their own hotel bills. Jim believes that the hotel cost for the group should be paid by the tour company. Which legal action would be most appropriate?
A)small claims court
B)mediation
C)legal aid society
D)arbitration
E)class action suit
21.An implied warranty that comes with a used car is that:
A)major repairs are the responsibility of the seller.
B)government agencies will repair safety defects.
C)the vehicle must be in operating condition.
D)hidden defects will be repaired at no cost to the buyer.
E)a vehicle must operate properly for at least one year.
22.A vehicle sold "as is" has:
A)a limited warranty.
B)no express warranty.
C)a 30-day guarantee.
D)a full warranty on parts but not labor.
E)no implied warranties.
23.A disadvantage of leasing an automobile would be the:
A)unexpected costs with a closed-end lease.
B)responsibility for repair costs.
C)poor expense records for tax purposes.
D)limited mileage in the lease agreement.
24. Hector Ramirez has decided he needs a new car so that he has reliable transportation to work. He is getting recommendations from his friends as to what might be a good car to purchase. He is also looking at the Consumer Reports magazine to determine what they recommend as a safe, low maintenance car and he has gone looked at some web sites on the internet as well. What step in the purchasing process is Hector carrying out?
A)Problem identification
B)Information gathering
C)Evaluating alternatives
D)Determining the purchase price
E)Post purchase activities
- Which of the following would be an advantage of leasing a vehicle?
A)Automatic ownership interest in the car
B)Unlimited mileage on the car
C)No need to meet credit requirements
D)Lease payments are likely to be lower than finance payments
E)All of the above are advantages of leasing a vehicle
Chapter 9 The Housing Decision: Factors and Finances
True/False Questions
TF26. Ease of mobility is an advantage of renting.
TF27. A security deposit is a fee charged to help you find an apartment or house to rent.
TF28. Condominiums involve the purchase of an individual living unit rather than an entire building.
TF29. Negotiating a purchase price for a home usually involves an offer and counteroffers.
TF30. Amortization refers to changes in the monthly payment for a variable rate mortgage.
TF31. Adjustable rate mortgages with a payment cap can result in a situation of negative amortization.
TF32. An escrow account is designed to reduce the cost of a mortgage.
T F 33.The purpose of a rate cap in an adjustable rate mortgage is to limit the amount
the payments on the loan can rise.
T F 34.A graduated payment mortgage is a mortgage where the payments decrease
every five to ten years.
T F 35.A deed is the document that transfers ownership of the property from one
person to another.
Multiple Choice Questions
36.Renting is more advantageous than buying a home for:
A)lower short-term living costs.
B)financial benefits.
C)long-term investment purposes.
D)receiving tax benefits.
E)permanence of residence.
37. Brenda Williams plans to rent instead of buy her housing. What advantage of renting will Brenda encounter?
A)tax advantages
B)lower initial costs
C)community pride
D)financial benefits
E)home improvement flexibility
38. The legal document involved in renting an apartment is called a(n):
A)service contract.
B)mortgage.
C)lease.
D)security deposit.
E)escrow account.
39. The purpose of a security deposit is to:
A)pay for potential damages.
B)cover the costs of utilities.
C)pay for the tenant's portion of real estate property taxes.
D)cover increases in monthly rent.
E)meet government housing regulations for a safe building.
40. A condominium involves:
A)renting a mobile home.
B)part ownership of a building by a nonprofit organization.
C)ownership of an individual living unit.
D)government-subsidized housing.
E)renting a house with the option to buy.
41. Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction would reduce their taxable income by:
A)$1,000.
B)$2,240.
C)$3,000.
D)$4,000.
E)$8,000.
42. A common financial risk of home ownership is that:
A)interest rates may change with a conventional mortgage.
B)property values may decrease.
C)mortgage interest is not tax deductible.
D)only a portion of real estate taxes are tax deductible.
43. Earnest money has the purpose of:
A)paying real estate property taxes.
B)reducing the mortgage interest rate.
C)serving as good faith by a homebuyer.
D)paying the real estate agent's commission.
E)being a mortgage application fee.
44. The amount of mortgage a person is eligible for would be increased by:
A)higher interest rates.
B)a lower down payment.
C)high debt obligations.
D)a low family income.
E)lower interest rates.
45. A conventional mortgage usually involves:
A)a variable interest rate.
B)a government guarantee.
C)a balloon payment.
D)equal payments.
E)a payment cap.
46. Negative amortization is the result of:
A)a lower amount owed on the mortgage.
B)a higher amount owed on the mortgage.
C)a lower escrow account.
D)lower interest rates.
E)a lower down payment.
47. Fran Laurel expects her income to rise every few years as she gains experience in her career. Which mortgage has payments that rise to different levels every 5 or 10 years?
A)buy down
B)shared appreciation mortgage
C)growing equity mortgage
D)balloon mortgage
E)graduated payment
48. Refinancing of a mortgage is recommended when:
A)interest rates rise.
B)interest rates fall.
C)the escrow account balance declines.
D)two or more points are required by the lender at the time of closing.
49. Which of the following is an advantage of buying?
A)Mobility
B)Tax benefits
C)Fewer responsibilities
D)Minimal financial commitment
E)All of the above are advantages of buying
- Duane Miller wants to know what price home he can afford. His annual gross income is $60,000. He has no other debt expenses and expects property taxes and insurance to cost $400 per month. He knows he can get a 6%, 15 year mortgage so that his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duane’s affordable home purchase price? (Round your answer to the nearest $100).
A)$148,300
B)$177,900
C)$164,800
D)$197,700
E)$1,483,000
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