Personal Finance

1. When considering the credit union, online, and bank alternatives, what three general factors should the Dumonts review for each? How might debit card services and costs vary with each?

5. Which provides the higher after-tax yield: the Dumonts’ 3 percent bank savings account or a federal and state tax-free money market fund yielding 2.25 percent? The Dumonts are in the 15 percent federal marginal tax bracket. 10. The Dumonts’ take-home pay (after deductions for taxes and benefits) is approximately $5,175 monthly. Current nonmortgage debt payments equal $911 (i.e., $405 auto, $100 miscellaneous credit, $196 student loan, and $210 furniture). Calculate and interpret their debt limit ratio. Assume they could purchase another auto with a $300 monthly payment. Calculate and interpret their revised debt limit ratio. What advice would you give the Dumonts about purchasing another vehicle? 6

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6. In anticipation of purchasing a home, Cory and Tisha have been advised to check their credit report. Why? What is the role of the credit bureau, the credit report, and the FICO score in the determination of creditworthiness and the cost of credit? How can they get their credit report? What are the Dumonts’ alternatives if they find erroneous information in their credit report?

7. What are the “five Cs” of credit? Define and explain each, based on the information provided about the Dumont household.