Finance 300 Final Exam Key Terms With
100% Verified Solutions
Annual percentage rate (APR) - ANSWER -The rate at which your principal
compounds.
Installment credit - ANSWER -Typically issued by one vendor, such as a
department store, for a specific purchase.
Default risk - ANSWER -The vendor screens the applicant and extends credit,
bearing the default risk, or risk of nonpayment.
Revolving credit - ANSWER -Extends the ability to delay payment for different
items from different vendors up to a certain limit.
Charge card / Credit card - ANSWER -Such credit is lent by a bank or finance
company.
Credit cycle - ANSWER -The charge card balance must be paid in full in each
period.
Credit rating - ANSWER -Specialize in evaluating borrowers' credit risk or default
risk for lenders.
Credit score - ANSWER -Lenders use to determine their willingness to lend and
their price.
Identity theft - ANSWER -A growing problem.
Financial identity theft - ANSWER -Occurs when someone poses as you based on
having personal information such as your Social Security number.
, Grace period - ANSWER -Many credit cards offer a grace period between the
time of the credit purchase and the time of payment.
Payday loan - ANSWER -Offers very short-term small personal loans at high
interest rates.
Interest rate risk - ANSWER -The risk of not being paid enough to outweigh their
opportunity cost and make a profit from lending.
Floating-rate loan - ANSWER -The interest rate 'floats' or changes, usually
relative to a benchmark.
Fixed-rate loan - ANSWER -The interest rate stays the same.
Prime rate - ANSWER -The rate that banks charge their very best borrowers.
Buyer's remorse - ANSWER -Regret at not making a better purchase in order to
use your limited income most efficiently.
Brokers - ANSWER -They can add value to your purchasing process by providing
information or convenience.
Price discrimination - ANSWER -The practice of charging a different price for the
same product based on consumer needs.
Quantity discounts - ANSWER -A lower unit price for a higher volume purchased.
Scam - ANSWER -A fraudulent business activity or swindle.
Lease - ANSWER -A long-term rental agreement with a buyout option at
maturity.
Buyout option - ANSWER -At the end of the lease, you can buy the car outright or
give it back.
, Manufacturer's suggested retail price (MSRP) - ANSWER -The sticker price for a
vehicle model with those features.
Warranty - ANSWER -A promise about the quality of the product for a certain
period.
Lemon Laws - ANSWER -Regulate sales terms, purchase cancellation conditions,
and warranty requirements.
Multiple-unit dwelling - ANSWER -Can be used to create rental income or to
house extended family members.
Mobile homes - ANSWER -Large trailers fitted with utilities connections for use
as residences.
Condominium - ANSWER -The homeowner owns a unit in a multiple-unit
dwelling.
Cooperative housing - ANSWER -A unit in a building owned by a nonprofit
association for residents' use.
Principal, interest, taxes, and insurance (PITI) - ANSWER -Monthly housing cost.
Realtor - ANSWER -What buyers use to identify homes for sale.
Liens - ANSWER -Claims outstanding against the property.
Down payment - ANSWER -Percentage of the purchase price paid in cash upon
purchase.
Private mortgage insurance - ANSWER -Insures the lender against the costs of
default.
Closing costs - ANSWER -Transaction costs of the purchase or for immediate
renovations.
100% Verified Solutions
Annual percentage rate (APR) - ANSWER -The rate at which your principal
compounds.
Installment credit - ANSWER -Typically issued by one vendor, such as a
department store, for a specific purchase.
Default risk - ANSWER -The vendor screens the applicant and extends credit,
bearing the default risk, or risk of nonpayment.
Revolving credit - ANSWER -Extends the ability to delay payment for different
items from different vendors up to a certain limit.
Charge card / Credit card - ANSWER -Such credit is lent by a bank or finance
company.
Credit cycle - ANSWER -The charge card balance must be paid in full in each
period.
Credit rating - ANSWER -Specialize in evaluating borrowers' credit risk or default
risk for lenders.
Credit score - ANSWER -Lenders use to determine their willingness to lend and
their price.
Identity theft - ANSWER -A growing problem.
Financial identity theft - ANSWER -Occurs when someone poses as you based on
having personal information such as your Social Security number.
, Grace period - ANSWER -Many credit cards offer a grace period between the
time of the credit purchase and the time of payment.
Payday loan - ANSWER -Offers very short-term small personal loans at high
interest rates.
Interest rate risk - ANSWER -The risk of not being paid enough to outweigh their
opportunity cost and make a profit from lending.
Floating-rate loan - ANSWER -The interest rate 'floats' or changes, usually
relative to a benchmark.
Fixed-rate loan - ANSWER -The interest rate stays the same.
Prime rate - ANSWER -The rate that banks charge their very best borrowers.
Buyer's remorse - ANSWER -Regret at not making a better purchase in order to
use your limited income most efficiently.
Brokers - ANSWER -They can add value to your purchasing process by providing
information or convenience.
Price discrimination - ANSWER -The practice of charging a different price for the
same product based on consumer needs.
Quantity discounts - ANSWER -A lower unit price for a higher volume purchased.
Scam - ANSWER -A fraudulent business activity or swindle.
Lease - ANSWER -A long-term rental agreement with a buyout option at
maturity.
Buyout option - ANSWER -At the end of the lease, you can buy the car outright or
give it back.
, Manufacturer's suggested retail price (MSRP) - ANSWER -The sticker price for a
vehicle model with those features.
Warranty - ANSWER -A promise about the quality of the product for a certain
period.
Lemon Laws - ANSWER -Regulate sales terms, purchase cancellation conditions,
and warranty requirements.
Multiple-unit dwelling - ANSWER -Can be used to create rental income or to
house extended family members.
Mobile homes - ANSWER -Large trailers fitted with utilities connections for use
as residences.
Condominium - ANSWER -The homeowner owns a unit in a multiple-unit
dwelling.
Cooperative housing - ANSWER -A unit in a building owned by a nonprofit
association for residents' use.
Principal, interest, taxes, and insurance (PITI) - ANSWER -Monthly housing cost.
Realtor - ANSWER -What buyers use to identify homes for sale.
Liens - ANSWER -Claims outstanding against the property.
Down payment - ANSWER -Percentage of the purchase price paid in cash upon
purchase.
Private mortgage insurance - ANSWER -Insures the lender against the costs of
default.
Closing costs - ANSWER -Transaction costs of the purchase or for immediate
renovations.
