In insurance, the larger the number of exposures of a case, the higher the risk for the insurance company to sell insurance for that case.
T F
2. Among the many different ways for people to handle risk, buying insurance is an effective way to reduce risk.
T F
3. A mortgage loan with a negative amortization causes both the principal and interest balances to increase over time.
T F
4. Your liability insurance is designed to protect you from financial losses resulting from any damage or destruction to the properties of others that is caused by you.
T F
5. Paying higher deductible and/or higher insurance co-payment would result in increasing the regular premium.
T F
6. Health insurance will generally cover an illness or injury which starts during the period covered, even if the policy expires before treatment ends.
T F
7. If the down payment is less than what the conventional mortgage loan requires, MIP- insurance would be required, in addition to the HO- insurance.
T F
8. Calculating mortgage payment by the computer financial calculators does not factor in the taxes and insurance portions.
T F
9. Effective Marginal Tax Rate is a collective rate that includes federal, state, local, and other marginal tax rates.
T F
10. In practice, the stated interest rate quoted by lenders may not be exactly the same as the Annual Percentage Rate (APR).
T F
11. Both Real income and Nominal income are terms to reflect the actual purchasing power of our money.
T F
12. The Consumer price index (CPI) is a broad measure of the change in prices, which is used to quantify inflation.
T F
13. The “Residual Value” of a car is the projected market value at the end of the car’s life expectancy.
T F
14. Regressive taxes are those taxes which decrease as the base on which they are imposed decreases.
T F
15. A Conversion period is the basic time limit between successive interest calculations.
T F
16. Income-expenses statement is identified by the net worth.
T F
17. A balance sheet describes the financial status at a certain point in time
T F
18. A person who has a negative net worth is technically insolvent.
T F
19. The 30-36 months old car is assumed to be the optimal time to buy for it yields the largest positive difference between value and cost.
T F
20. A mortgage loan point is a fee, usually 10% of the amount of the loan, paid at closing.
T F
21. An adjustable-rate mortgage loan is characterized by a variable interest rate and fixed monthly payment.
T F
22. A credit worthiness is determined by both, the lender and borrower.
T F
23. Grace period in credit is usually determined by the time between posting date and due date.
T F
24. A Manufacturer’s Suggested Retail Price (MSRP) of a car is the same as the “Sticker Price”.
T F
1. True; This is called Adverse selection
2. True; Its proven that insurance is one of the best way to manage risk
3. True ; Negative amortised loan is one scheme where we can pay payments less than the schedule interest and due to this principal amount and interest in the future increases
4. False ; intentional damage, criminal proceeding etc not covered
5. False: paying more deductible reduces premium
6. False; Once benefit period is over, we need to renew the insurance
7. True; if downpayment is less than 20%, MIP(Mortgage Insurance Premium) policy is required
8. True; there are some calculators like PITI calculators which factor in this
9. False: Effective tax rate refers to federal taxes
10. True ; Annualized Percentage Rate include other costs which makes it higher than interest rate usually
11. False; Real income only show actual purchasing power
12. True;
13: True;
14. False; Regressive tax decreases as the base increases
15. True;
16; False; incom-expenses statement shows net profit
17. True
18. True; for technically to be insolvent, if the networth is negative
19. False; cant say this in ideal conditio
20. False; Mortgage point usually 10% is higher and generally 1% is used.
21: False; ARM loan is charecterised by fixed interest rate(not monthly payment) in the beginning and then variable interest rates
22. False; Determined only by lendor
23.False; A grace period is the time allowed after due date where payment can be done without penalty
24. True; Sticker price and MSRP are same
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