How Much You Know About Credit Cards? Trivia Quiz
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- 1.
Which of the following is NOT an example of credit?
- A.
Home mortgage
- B.
Auto loan
- C.
Student loan
- D.
Debit card
Correct Answer
D. Debit cardExplanation
A debit card is not an example of credit because it allows the user to spend money directly from their own bank account. Unlike credit cards, which involve borrowing money that needs to be paid back, debit cards only allow access to the funds available in the account. Therefore, a debit card does not involve any form of credit.Rate this question:
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- 2.
Which of the following factors should be considered when selecting a college?
- A.
The "net price" of the college/university
- B.
Graduation rates
- C.
Whether college offers the field of study you are interested in
- D.
Quality of the student body based on test scores, GPA and selectivity of admissions
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
When selecting a college, it is important to consider various factors. The "net price" of the college/university is crucial as it determines the affordability of education. Graduation rates indicate the success and effectiveness of the institution. The availability of the field of study you are interested in is essential to ensure that you can pursue your desired career path. Lastly, the quality of the student body based on test scores, GPA, and selectivity of admissions reflects the academic standards and competitiveness of the college. Considering all of these factors is necessary for making an informed decision about college selection.Rate this question:
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- 3.
In order to qualify for financial aid, prospective college students must file the:
- A.
Financial Aid Letter
- B.
FAFSA
- C.
Credit Report
- D.
Magna Carta
Correct Answer
B. FAFSAExplanation
Prospective college students must file the FAFSA (Free Application for Federal Student Aid) in order to qualify for financial aid. The FAFSA is a form that students must complete to determine their eligibility for federal financial aid programs, such as grants, loans, and work-study opportunities. It collects information about the student's and their family's financial situation to assess their need for assistance. By filing the FAFSA, students can access various types of financial aid to help cover the costs of their college education.Rate this question:
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- 4.
Which of the statements below that are TRUE about 401K plans?
- A.
It pays to start saving immediately in a 401k plan because of the impact of compounding over a long period of time.
- B.
Company’s will often provide a matching contribution to what an employee contributes to their 401K plan (e.g., if an employee contributes $200, the employer could provide a $100 matching contribution)
- C.
A 401K plan is portable in that it stays with the employee even after they have left their company
- D.
A 401K is a retirement savings plan that an investor makes contributions to through deductions from their payroll at the company they work for.
- E.
All of the above
Correct Answer
E. All of the aboveExplanation
The given answer is correct because all of the statements mentioned are true about 401K plans. Starting to save immediately in a 401K plan is beneficial due to the compounding effect over time. Companies often provide matching contributions to encourage employees to save in their 401K plans. A 401K plan is portable and stays with the employee even after they leave the company. Lastly, a 401K plan is indeed a retirement savings plan where contributions are made through deductions from the employee's payroll.Rate this question:
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- 5.
Which of the following strategies will result in you paying the LARGEST amount of interest to the credit card company?
- A.
Paying off your credit card balance each month
- B.
Paying 20% of your credit card balance every month
- C.
Making the minimum payment (2% of your credit card balance) every month
Correct Answer
C. Making the minimum payment (2% of your credit card balance) every monthExplanation
Making the minimum payment (2% of your credit card balance) every month will result in paying the largest amount of interest to the credit card company. This is because by only making the minimum payment, the remaining balance will continue to accrue interest, resulting in a higher overall amount of interest paid over time compared to paying off the balance in full each month or making a fixed payment of 20% of the balance.Rate this question:
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- 6.
If you have a very high credit score (e.g., over 800) you are more likely to be approved when you apply for credit (like a credit card or auto loan) and will likely have a lower interest rate on your loan than a borrower with a low credit score.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Having a high credit score indicates that you have a good credit history and are considered a low-risk borrower. Lenders are more likely to approve your credit application because they have confidence in your ability to repay the loan. Additionally, a high credit score can result in a lower interest rate on your loan because lenders see you as a reliable borrower.Rate this question:
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- 7.
Indicate ALL of the possible consequences of making a late payment on your credit card.
- A.
Charged a late payment fee (usually around $35).
- B.
Increase in interest rate to the Penalty APR rate, which will be significantly higher.
- C.
Increase in rewards offered to cardholder.
- D.
A credit score may go down as a result of poor payment history.
Correct Answer(s)
A. Charged a late payment fee (usually around $35).
B. Increase in interest rate to the Penalty APR rate, which will be significantly higher.
D. A credit score may go down as a result of poor payment history.Explanation
Making a late payment on your credit card can have several consequences. Firstly, you will be charged a late payment fee, typically around $35. Additionally, your interest rate may increase to the Penalty APR rate, which is usually significantly higher than your regular rate. This can result in higher interest charges on your outstanding balance. Lastly, your credit score may go down as a result of a poor payment history, which can make it more difficult for you to obtain credit in the future.Rate this question:
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- 8.
If you plan to pay off your credit card balance on-time EVERY month and will not be carrying credit card debt, which factor will be MOST important to you in selecting a credit card:
- A.
Interest rate.
- B.
Rewards or incentives offered by credit card company.
- C.
Quality of credit card commercials.
- D.
Late payment fees.
Correct Answer
B. Rewards or incentives offered by credit card company.Explanation
If you plan to pay off your credit card balance on-time every month and will not be carrying credit card debt, the most important factor to consider in selecting a credit card would be the rewards or incentives offered by the credit card company. Since you will not be accruing interest charges, the interest rate becomes less relevant. The quality of credit card commercials is subjective and does not impact the practical benefits of the card. Late payment fees are also not relevant if you plan to make on-time payments. Therefore, the rewards or incentives offered by the credit card company would be the most important factor to consider in this scenario.Rate this question:
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- 9.
Bank of America VISA is offering an INTRODUCTORY rate of 0% APR (remember that APR is fancy word for interest rate) and 3% cash back on all purchases. What are the TWO best questions the savvy consumer should ask when evaluating this program?
- A.
How long will this introductory offer last?
- B.
Can I get two credit cards for my account?
- C.
What will the APR and the cashback rewards be after the introductory period?
- D.
Does Bank of America VISA allow online transactions?
Correct Answer(s)
A. How long will this introductory offer last?
C. What will the APR and the cashback rewards be after the introductory period?Explanation
The two best questions a savvy consumer should ask when evaluating this program are: How long will this introductory offer last? and What will the APR and the cashback rewards be after the introductory period? These questions are important because they provide information about the duration of the introductory offer and the terms and conditions that will apply once the offer expires. By knowing this information, the consumer can make an informed decision about whether to take advantage of the offer and how it will impact their finances in the long run.Rate this question:
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- 10.
Which website provides consumers with FREE credit reports from each of the three credit bureaus on an annual basis? If you are unsure, do some web research to find the correct answer.
- A.
Freecreditreports.com
- B.
Freescores.com
- C.
Freecredit.com
- D.
Annualcreditreport.com
Correct Answer
D. Annualcreditreport.comExplanation
annualcreditreport.com is the correct answer because it is the only website that provides consumers with free credit reports from each of the three credit bureaus (Equifax, Experian, and TransUnion) on an annual basis as mandated by the Fair Credit Reporting Act (FCRA). The other websites mentioned in the options may provide credit reports or scores, but they may not offer reports from all three bureaus or charge a fee for their services.Rate this question:
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- 11.
The two MOST important factors in determining your credit score are:
- A.
Amounts owed (how much debt do you owe?)
- B.
Length of credit history (how long have you had credit?)
- C.
Types of credit used (what type of loans do you have?)
- D.
Payment history (do you make on-time payments?)
Correct Answer(s)
A. Amounts owed (how much debt do you owe?)
D. Payment history (do you make on-time payments?)Explanation
The credit score is determined by several factors, but the two most important factors are the amounts owed and the payment history. The amounts owed refer to the total debt that a person owes, including credit card balances, loans, and mortgages. This factor is crucial because it shows the level of financial responsibility and the ability to manage debt. The payment history indicates whether a person consistently makes on-time payments or has a history of late or missed payments. This factor is significant because it reflects the reliability and trustworthiness of the individual in repaying their debts.Rate this question:
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- 12.
What are two ways that investors in stocks make money? Reflect back on the Stock Market Game:
- A.
Dividend and share price appreciation (rise in the stock price)
- B.
Return of principal and coupon.
- C.
Dividend and coupon.
- D.
Coupon and share price appreciation (rise in the stock price).
Correct Answer
A. Dividend and share price appreciation (rise in the stock price)Explanation
Investors in stocks can make money through dividends and share price appreciation. Dividends are a portion of a company's profits that are distributed to shareholders, providing them with a regular income stream. Share price appreciation refers to the increase in the value of a stock over time, allowing investors to sell their shares at a higher price than what they initially paid. Both dividends and share price appreciation can contribute to the overall profitability of investing in stocks.Rate this question:
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- 13.
The stock market generates predictable returns of 8-9% per year with little variation on a year to year basis (in other words, when looking at annual returns of an index fund like the S&P500 there is little change on a year to year basis).
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because the stock market does not generate predictable returns of 8-9% per year with little variation on a year to year basis. The stock market is known for its volatility and fluctuations, and annual returns can vary greatly. While historical data may show that on average the stock market has provided positive returns over the long term, there is no guarantee of consistent returns or lack of variation on a year to year basis.Rate this question:
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- 14.
Which of the following investments would provide an investor with the most diversification?
- A.
Investing in a single company’s stock.
- B.
Investing in a single company’s bonds.
- C.
Putting your money in a savings account.
- D.
Buying an index fund like the S&P500 Fund.
Correct Answer
D. Buying an index fund like the S&P500 Fund.Explanation
Buying an index fund like the S&P500 Fund would provide an investor with the most diversification. An index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific index, such as the S&P500. By investing in an index fund, the investor gains exposure to a wide range of stocks from different companies across various sectors. This diversification helps to reduce the risk associated with investing in a single company's stock or bonds. Additionally, index funds are designed to provide broad market exposure, making them an attractive option for investors seeking diversification.Rate this question:
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- 15.
School A has a sticker price of $52,000 and an average net price of $6,000 for families with an income of less than $60,000. Meanwhile, School B has a sticker price of $22,000 and an average net price of $11,000 for families with an income of less than $60,000. If your number one factor in selecting a school was cost and your family income was under $60,000, which school would you choose?
- A.
School A
- B.
School B
- C.
They are about the same.
Correct Answer
A. School AExplanation
Based on the given information, School A has a lower average net price of $6,000 compared to School B's average net price of $11,000 for families with an income of less than $60,000. This means that School A would be more affordable for families in this income bracket. Therefore, if cost is the most important factor in selecting a school and the family's income is under $60,000, the logical choice would be School A.Rate this question:
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- 16.
School A admits 64% of students who apply while School B admits 7% of students who apply. Which school is considered more selective in their admissions process?
- A.
School A
- B.
School B
- C.
About the same
Correct Answer
B. School BExplanation
School B is considered more selective in their admissions process because they admit only 7% of students who apply, while School A admits 64% of students who apply. A lower admission rate indicates a higher level of selectivity, as it means that a smaller percentage of applicants are accepted into the school.Rate this question:
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- 17.
You are excited about the opportunity to attend State U after you graduate from Eastside. You had a relative attend the school, have heard that their graduates get great jobs and also that it is a fun place to go. Their TV ads brag about all the great careers their students enjoy because of their State U degree. While researching the school on College Navigator, you discover that the school's net price is $32,000/year, that their graduation rate within 4 years is 20% and that their student loan default rate is over 30%. What would you do?
- A.
Be sure to apply to State U. Those statistics should make you even more excited about attending.
- B.
Immediately research additional schools as you decide based on the statistics that State U is definitely not the place you want to study after all
- C.
Not sure
Correct Answer
B. Immediately research additional schools as you decide based on the statistics that State U is definitely not the place you want to study after allExplanation
Based on the given information, it is clear that State U has a high net price, a low graduation rate within 4 years, and a high student loan default rate. These statistics indicate that attending State U may not be a wise decision. Therefore, the best course of action would be to immediately research additional schools as you have decided that State U is definitely not the place you want to study after all.Rate this question:
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- 18.
How can you improve your credit score?
- A.
Borrow more money on each of your credit cards
- B.
Get more credit cards
- C.
Pay all of your bills on-time
- D.
Get a higher paying job
Correct Answer
C. Pay all of your bills on-timeExplanation
Paying all of your bills on-time can improve your credit score because it demonstrates responsible financial behavior. Timely payments show lenders that you are reliable and can be trusted to repay your debts. This helps to build a positive credit history and can increase your credit score over time.Rate this question:
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- 19.
Which of these organizations can request a copy of your credit report? If you are uncertain, do not forget to use web research to find the answer.
- A.
Lenders you are borrowing money from
- B.
Utility companies
- C.
Employers
- D.
Landlords who you want to rent an apartment from
Correct Answer(s)
A. Lenders you are borrowing money from
B. Utility companies
C. Employers
D. Landlords who you want to rent an apartment fromExplanation
Lenders, utility companies, employers, and landlords who you want to rent an apartment from can request a copy of your credit report. Lenders need to assess your creditworthiness before approving a loan, utility companies may check your credit history before providing services, employers may review your credit report as part of the hiring process, and landlords may use it to evaluate your rental application.Rate this question:
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- 20.
Which of the following is "free money" sources that can help you pay for college that you DO NOT need to repay?
- A.
Pell Grants
- B.
Cal Grants (for California students who stay in-state)
- C.
Scholarships
- D.
Institutional Grants (grants from the school you attend)
- E.
Student Loans
Correct Answer(s)
A. Pell Grants
B. Cal Grants (for California students who stay in-state)
C. Scholarships
D. Institutional Grants (grants from the school you attend)Explanation
Pell Grants, Cal Grants, Scholarships, and Institutional Grants are all sources of "free money" for college that do not need to be repaid. These forms of financial aid are awarded based on factors such as financial need, academic achievement, or specific criteria set by the granting organization or institution. Student Loans, on the other hand, do need to be repaid with interest after graduation.Rate this question:
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- 21.
Which statement about student debt below is TRUE?
- A.
Since education is an investment in your future, having a reasonable amount of student loan debt is OK.
- B.
Student loans should be avoided at all costs. If you need to take out student loans to go to college, you should not go.
- C.
Few students (less than 10% of students) need to take out student loans to go to college since college costs are declining.
- D.
You should take out student loans first before you consider the grants that are offered to you.
Correct Answer
A. Since education is an investment in your future, having a reasonable amount of student loan debt is OK.Explanation
This statement is true because it acknowledges that student loan debt is sometimes necessary in order to invest in one's education and future. It also emphasizes the importance of having a reasonable amount of debt, suggesting that excessive debt should be avoided. This aligns with the understanding that education is an investment that can lead to future opportunities and financial stability.Rate this question:
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- 22.
What are the best arguments (PICK TWO) that you can make to convince your parents/guardian to co-sign your application for a credit card before you turn 21?
- A.
Getting a credit card will allow you to begin to establish a credit history and a history of on-time payment which will get you a higher credit score sooner.
- B.
Getting a credit card will get you to spend less since research shows people spend less with credit cards than with cash.
- C.
Credit cards provide better fraud protection than debit cards so I am better off using a credit card instead of my debit card.
- D.
Don't worry if I don't pay the credit card on time as it will not affect your credit score.
Correct Answer(s)
A. Getting a credit card will allow you to begin to establish a credit history and a history of on-time payment which will get you a higher credit score sooner.
C. Credit cards provide better fraud protection than debit cards so I am better off using a credit card instead of my debit card.Explanation
Getting a credit card at a young age will enable you to start building a credit history and demonstrate responsible payment habits, leading to a higher credit score in the future. Additionally, credit cards offer better protection against fraud compared to debit cards, making them a safer option for financial transactions.Rate this question:
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- 23.
You invest $1,000 to purchase 20 shares of the GAP at a purchase price of $50 per share.
- A month later, GAP pays a dividend of $1 per share to shareholders.
- You sell your 20 shares of GAP two months later for $60 per share.
- A.
$1,200 in cash with gain of $200
- B.
$1,220 in cash with gain of $1,000
- C.
$1,200 in cash with gain of $220
- D.
$1,220 in cash with gain of $220
Correct Answer
D. $1,220 in cash with gain of $220Explanation
After selling the 20 shares of GAP for $60 per share, you would receive a total of $1,200 in cash. This is calculated by multiplying the selling price ($60) by the number of shares (20).
To calculate the gain from your original investment, you need to subtract the total cost of the shares from the total amount received from selling them. The total cost of the shares is calculated by multiplying the purchase price ($50) by the number of shares (20), which equals $1,000.
Therefore, the gain from your original investment is $1,200 (cash received) - $1,000 (total cost of shares) = $200.
So, you would have $1,220 in cash with a gain of $220 from your original investment.Rate this question:
- 24.
Which investor has the largest portfolio? James, Amani, Evelyn and Clarissa each own the same three stocks: Bank of America, Nike and McDonalds. Here are the number of shares they each own:Investor BofA Nike McDonaldsJames102030Amani201010Clarissa301020Evelyn103020Their current share prices are:Bank of America: $75 per shareNike: $25 per shareMcDonald's: $40Sort the investors from LARGEST portfolio value to smallest value (same calculations you did playing the Stock Market Game).
- A.
Amani, Clarissa, Evelyn, James
- B.
James, Evelyn, Amani, Clarissa
- C.
Evelyn, Amani, Clarissa, James
- D.
Clarissa, James, Evelyn, Amani
Correct Answer
D. Clarissa, James, Evelyn, AmaniExplanation
Clarissa has the largest portfolio because she owns the most shares of each stock. She owns 30 shares of Bank of America, 20 shares of Nike, and 10 shares of McDonald's. The portfolio value is calculated by multiplying the number of shares owned by the share price of each stock. Therefore, Clarissa's portfolio value is higher than the others. James owns 10 shares of Bank of America, 20 shares of Nike, and 30 shares of McDonald's. Evelyn owns 10 shares of Bank of America, 30 shares of Nike, and 20 shares of McDonald's. Amani owns 20 shares of Bank of America, 10 shares of Nike, and 10 shares of McDonald's.Rate this question:
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- 25.
When thinking about the relationship between risk and return in an investing context, which statement below is TRUE?
- A.
There is no relationship between risk and return.
- B.
For more risky investments, investors expect lower investment returns. For example, since Stryker was a speculative stock, investors would not expect a high return from it.
- C.
Low risk investments generate high returns. For example, savings accounts which are among the lowest risk investments are expected to generate high returns.
- D.
There is a direct relationship between risk and return. Investors expect to earn higher returns from riskier investments.
Correct Answer
D. There is a direct relationship between risk and return. Investors expect to earn higher returns from riskier investments.Explanation
For an investing context, the correct answer is that there is a direct relationship between risk and return. This means that investors expect to earn higher returns from riskier investments. This is because risk and return are typically positively correlated, meaning that as the level of risk increases, so does the potential for higher returns. In contrast, the other statements are incorrect. The first statement that there is no relationship between risk and return is false, as there is indeed a relationship. The second statement that more risky investments lead to lower returns is also false, as riskier investments generally have the potential for higher returns. Lastly, the statement that low-risk investments generate high returns is false, as low-risk investments typically have lower potential returns.Rate this question:
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Mar 21, 2023Quiz Edited by
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Jul 15, 2014Quiz Created by
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