Principles of Investment — Unit test Answers

Charles is going to purchase a new car that has a list price of $21,450. He is planning on trading in his good-condition 2004 Dodge Neon and financing the rest of the cost over three years, paying monthly. His finance plan has an interest rate of 12.28%, compounded monthly. Charles will also be responsible for 6.88% sales tax, a $1,089 vehicle registration fee, and a $124 documentation fee. If the dealer gives Charles 80% of the listed trade-in price on his car, once the financing is paid off, what percent of the total amount paid will the interest be? (Consider the trade-in to be a reduction in the amount paid.) Dodge Cars in Good ConditionModel/Year20042005200620072008Viper$7,068$7,225$7,626$7,901$8,116Neon$6,591$6,777$6,822$7,191$7,440Intrepid$8,285$8,579$8,699$9,030$9,121Dakota$7,578$7,763$7,945$8,313$8,581a.17.64%b.15.67%c.16.70%d.12.86%

Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9% interest rate for 36 months with a residual value of 57%. The MSRP for the car Jennifer is leasing is $17,500. What will Jennifer’s monthly lease payment be?a.$93.84b.$99.75c.$209.03d.$312.06

What do borrowers use to secure a mortgage loan? Check all that apply.

Interest paid on a loan is calculated as a percentage of the

The following table shows a portion of a three-year amortization schedule. Use the information in the table to decide which of the following statements is true. a. The payment amount changes each month. b. The amount applied to the principal is decreasing each month. c. The amount applied to the principal is increasing each month. d. The amount applied to interest is increasing each month. Please select the best answer from the choices provided

A couple is required by their lender to have a down payment of 20% of the purchase price of the home they want to buy. If the couple has saved $35,000, what is the most expensive home the couple can afford to buy?a.$63,000b.$140,000c.$175,000d.$210,000

Jim has an annual salary of $96,000. His monthly expenses include a $2,500 mortgage payment, a $250 lease payment, $500 in minimum credit card payments, and a $425 payment on his speed boat. He also receives $1,200 in interest from his savings and other accounts each month. Calculate Jim’s DTI (debt-to-income) ratio.a.30%b.35%c.40%d.45%

What is meant by the “right to redress”?a.The consumer has the right to repeat any transaction.b.The consumer has the right to replacement of damaged goods.c.The consumer has the right to hear back from businesses that they contact.d.The consumer has the right to fair settlement of disputes.

Using the 28/36 ratio, determine the maximum allowable recurring debt for someone with a monthly income of $4,850.a.$388b.$776c.$970d.$1,358

The following chart shows a store’s coat sales for two years. Identify the percent increase in total sales and the percent increase in sales of trench coats. Then find which percent of increase is greater and by how much greater it is than the other. (Round your answer to the nearest tenth.) a. Sales of trench coats increased 0.7 percentage points faster than total coat sales. b. Sales of trench coats increased 8.3 percentage points faster than total coat sales. c. Total coat sales increased 2.5 percentage points faster than sales of trench coats. d. Total coat sales increased 10.7 percentage points faster than sales of trench coats. Please select the best answer from the choices provided

Peter wants to buy a duplex with a purchase price of $226,950. Peter can afford a 10% down payment. Peter earns $2,985 a month and wants to spend no more than 10% of his income on his mortgage payment. Peter is going to rent out the other half of the duplex. He thinks that if he charges $900 a month in rent this will cover the remainder of his mortgage payment. Given that Peter has a 30 year mortgage with a fixed rate of 6.25%, how should Peter adjust how much he charges for rent of the other half of the duplex?a.Peter should increase the rent by $200.b.Peter should increase the rent by $60.c.Peter should increase the rent by $10.d.Peter should keep the rent at $900.

Giselle wants to buy a condo that has a purchase price of $163,000. Giselle earns $2,986 a month and wants to spend no more than 25% of her income on her mortgage payment. She has saved up $33,000 for a down payment. Giselle is considering the following loan option: 20% down, 30 year at a fixed rate of 6.25%. What modification can be made to this loan to make it a viable option, given Giselle’s situation? a. Change to a 15 year fixed loan b. Change the interest to 5.5% c. Change the down payment to 18% down d. None. This is a viable option for Giselle. Please select the best answer from the choices provided

Why do some lenders require borrowers to secure credit?

Government regulations on credit aim to

Say that a company has treated you unfairly or dishonestly. Which of the following options could help you resolve the issue?I. Report them to the Better Business Bureau.II. Speak to their corporate consumer department.III. Seek the help of the Department of HHS.a.I and IIb.II and IIIc.I and IIId.II only

Bessie has an annual salary of $51,360. Each month she has a car payment of $210 and a student loan of $50. If she applies for a home loan, how likely is it Bessie will be approved based on her debt-to-income ratio?a.Very likely; recurring debt is less than what is allowed.b.Somewhat likely; recurring debt is equal to what is allowed.c.Not likely; recurring debt is higher than what is allowed.d.There is not enough information given to determine the answer.

In determining whether to issue a loan, banks are not allowed to ask about an applicant’s

Mr. and Mrs. Donahue want to buy a home valued at $365,000. If they have 21.5% of this amount saved for a down payment, how much will their home loan be?a.$78,475b.$286,525c.$341,275d.$357,153

Why does it take 30 years to pay off $150,000 loan, even though you pay $1000 a month? a. Sales tax is really high for home mortgages, and that is why monthly payments are much higher than just paying off principal. b. Banks trick investors into paying more money monthly so they can pocket the rest. c. Most home owners are expected to miss about half of their payments, so banks take this into account when determining the term of the loan. d. Even though the principal would be paid off in just over 10 years, it costs the bank a lot of money to fund the loan. The rest of the loan is paid out in interest. Please select the best answer from the choices provided

Why does insurance often provide "peace of mind"?