CAC Financial Analysis 2

Question 1

A borrower earns $4,000 gross per month and has $1,200 in monthly debt payments, including a proposed car payment. What is the debt-to-income (DTI) ratio?

Accepted Answer

30%

Answer

DTI equals total monthly debt divided by gross monthly income, so $1,200 / $4,000 = 30%.

Question 2

A borrower's proposed auto payment is $500 and gross monthly income is $3,125. What is the payment-to-income (PTI) ratio?

Accepted Answer

16%

Answer

PTI is the vehicle payment divided by gross monthly income: $500 / $3,125 = 16%.

Question 3

A vehicle is valued at $20,000 and the amount financed is $24,000. What is the loan-to-value (LTV) ratio?

Accepted Answer

120%

Answer

LTV equals amount financed divided by collateral value: $24,000 / $20,000 = 120%.

Question 4

Which situation best describes negative equity in an auto loan?

Accepted Answer

The loan balance is higher than the vehicle's market value

Answer

Negative equity, or being 'upside down,' means the borrower owes more than the vehicle is worth.

Question 5

An indirect auto lender buys a $15,000 retail installment contract from a dealer for $13,500. What is the dealer discount as a percentage of the contract amount?

Accepted Answer

10%

Answer

The discount is $1,500, and $1,500 / $15,000 = 10% of the contract amount.

CAC - Certified Acceptance Corporation Professional Practice Test

CAC - Certified Acceptance Corporation Professional Practice Test

CAC Financial Analysis 2