GEB 3006 EXAM QUESTIONS WITH ALL CORRECT ANSWERS
What are the dual mandates established by Congress for the Federal Reserve? - Answer- Control inflation and maximize employment
When banks advertise the interest rate on their savings accounts, they must show: - Answer- APY
If the annual inte...
What are the dual mandates established by Congress for the Federal Reserve? -
Answer- Control inflation and maximize employment
When banks advertise the interest rate on their savings accounts, they must show: -
Answer- APY
If the annual interest rate is 12%, the monthly periodic rate would be: - Answer- 1%
Assume you paid $300,000 for a house that is now worth $400,000. A bank will make
you a loan of 90% based on current value. You owe $200,000 on your first mortgage.
How much can you borrow on a second mortgage or home equity loan? - Answer-
$160,000
If you buy a larger size of a product, the price per unit (such as price per ounce) will
always be lower. - Answer- False
The price per unit of items bought in a warehouse club such as Sams or Costco will
always be lower than a regular retail store. - Answer- False
Retailers commonly offer new items at significantly higher prices, then plan to market
the goods down later to ultimately achieve the desired gross margin goal. - Answer-
True
Which of the following would provide the most objective information about a product? -
Answer- A food product ingredient label.
In most cases, service warranty contracts provide excellent protection and are generally
good deals. - Answer- False
Assume you spent $250 for a pressure washer that will save you $50 a year in rental
costs.
Using simple payback, how long will it take to get your money back? - Answer- 5 Years
It is never a good idea to prepay something for a discount due to the risk involved. -
Answer- False
, When shopping for a car, you should immediately offer your current car as a trade-in to
strengthen your bargaining power. - Answer- False
Zero percent financing is always a great deal since a zero percent interest rate is lower
than any bank would ever offer. - Answer- False
Is is always advisable to have your auto financing arranged in advanced before you
start negotiating on a car. - Answer- True
Assume that a dealer has offered you $10,000 for your car as a trade-in which will save
you 7% sales tax on your new car's tax value.
If you decide to sell the car to a third party, you need to get more than ______. -
Answer- $10,700
Assume you drive 10,000 miles per year and get 20 miles to the gallon.
If your car requires premium gas, how much more will this cost you over a 5 year period
assuming that premium gas costs $0.60/gallon more than regular? - Answer- $1,500
Depreciation on autos tends to be highest in years _______. - Answer- 1 to 3
Leasing cars is generally much cheaper than buying cars since the payment is so much
lower. - Answer- False
Generally, you need to plan to stay in a house for about ______ years to reduce the risk
of losing money on the house when you resell it. - Answer- 5 Years
What are some of the disadvantages of owning a house? - Answer- Housing values
could drop.
Limited mobility since it can take time to sell a house.
Higher costs such as maintenance and insurance.
Correct Answer All of the above are disadvantages of owning a house.
Which of the following statements is TRUE? - Answer- Real estate commissions are
usually 6% and paid by the seller.
Monthly escrow for property taxes and insurance can add up to ____ more to the
mortgage payment. - Answer- 40%
PITI stands for principal, interest, taxes and insurance. - Answer- True
The housing expense ratio of PITI divided by gross monthly income should not exceed
a maximum of ____. - Answer- 28% for conventional loans and 29% for FHA loans
The total debt ratio of (PITI + long term debt obligations) divided by gross monthly
income should not exceed _____. - Answer- 36% for conventional loans and 43% for
FHA loans.
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