PERSONAL FINANCE EXAM 1 2026
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED
EXPLANATIONS MIDTERM 1 STUDY GUIDE
Rebate - CORRECT ANSWER-This is a partial refund offered to attract the
buyer to purchase the vehicle.
Purchase option - CORRECT ANSWER-This is the price at which a lessee
can purchase his or her leased car or other asset of the end of the lease
period.
Lease - CORRECT ANSWER-This is an arrangement wherein the lessee
receives the use of an item, such as a car or a house, in exchange for
scheduled payments for a fixed period of time.
Depreciation - CORRECT ANSWER-This refers to the loss in the value of
an asset that occurs due to the wear and tear of the asset over a period of
time.
Closed-end lease - CORRECT ANSWER-This is a lease agreement that
allows the lessee to return the asset (for example, a car) at the end of the
lease term without any consequent payments if the terms of the contract
have been fulfilled.
, Sticker price - CORRECT ANSWER-This is the popular name given to a
vehicle manufacturer's suggested retail price (MSRP), which is posted on
the vehicle's window.
Residual value - CORRECT ANSWER-This term refers to the estimated
value of a leased asset at the end of the lease period.
Low-balling - CORRECT ANSWER-This refers to the practice of unethical
car dealers quoting a low sales price on a vehicle to induce a potential
customer to make an offer and then attempting to add costly add-ons to the
transaction prior to the signing of the contract.
Capitalized cost - CORRECT ANSWER-This refers to the price of the asset
(for example, a car) that is being leased.
Sales contract - CORRECT ANSWER-This agreement, which is used to
purchase a car, details the offering price and all conditions of the offer;
when the buyer and seller sign it, it establishes the terms of the legally
binding transaction.
Loan-to-value ratio - CORRECT ANSWER-This is a term used by financial
lenders defined as the ratio of the loan underwritten to the value of the
property in consideration.
Mortgage points - CORRECT ANSWER-This term is often used by lenders
as an alternative of charging interest on their loans.
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED
EXPLANATIONS MIDTERM 1 STUDY GUIDE
Rebate - CORRECT ANSWER-This is a partial refund offered to attract the
buyer to purchase the vehicle.
Purchase option - CORRECT ANSWER-This is the price at which a lessee
can purchase his or her leased car or other asset of the end of the lease
period.
Lease - CORRECT ANSWER-This is an arrangement wherein the lessee
receives the use of an item, such as a car or a house, in exchange for
scheduled payments for a fixed period of time.
Depreciation - CORRECT ANSWER-This refers to the loss in the value of
an asset that occurs due to the wear and tear of the asset over a period of
time.
Closed-end lease - CORRECT ANSWER-This is a lease agreement that
allows the lessee to return the asset (for example, a car) at the end of the
lease term without any consequent payments if the terms of the contract
have been fulfilled.
, Sticker price - CORRECT ANSWER-This is the popular name given to a
vehicle manufacturer's suggested retail price (MSRP), which is posted on
the vehicle's window.
Residual value - CORRECT ANSWER-This term refers to the estimated
value of a leased asset at the end of the lease period.
Low-balling - CORRECT ANSWER-This refers to the practice of unethical
car dealers quoting a low sales price on a vehicle to induce a potential
customer to make an offer and then attempting to add costly add-ons to the
transaction prior to the signing of the contract.
Capitalized cost - CORRECT ANSWER-This refers to the price of the asset
(for example, a car) that is being leased.
Sales contract - CORRECT ANSWER-This agreement, which is used to
purchase a car, details the offering price and all conditions of the offer;
when the buyer and seller sign it, it establishes the terms of the legally
binding transaction.
Loan-to-value ratio - CORRECT ANSWER-This is a term used by financial
lenders defined as the ratio of the loan underwritten to the value of the
property in consideration.
Mortgage points - CORRECT ANSWER-This term is often used by lenders
as an alternative of charging interest on their loans.
