Nuthrive Financial Literacy Quiz

2.

In which situation(s) is it smart to borrow money to cover a large expense?

When your favorite store is having a sale
When you desperately need a week of vacation
When you need to buy/lease a car to get a better paying job
All of the above

Correct Answer

A. When you need to buy/lease a car to get a better paying job

Explanation

Borrowing money to buy or lease a car in order to secure a better paying job can be considered a smart financial decision. In this situation, the borrowed money is being used as an investment in one's career growth and potential future earnings. By acquiring a reliable means of transportation, individuals can increase their job prospects and potentially improve their financial situation in the long run.

Rate this question:

3.

Being on a budget means...

You pay bills every month at the due date
You plan your expenses to be less than or equal to your income
You are earning enough money to be able to live well
Your bills are generally paid by every due date

Correct Answer

A. You plan your expenses to be less than or equal to your income

Explanation

Being on a budget means planning your expenses to be less than or equal to your income. This implies that you are consciously managing your finances by carefully considering your expenses and ensuring that they do not exceed what you earn. By doing so, you can effectively allocate your income towards necessary expenses and savings, allowing you to live within your means and avoid financial stress.

Rate this question:

4.

If you invest in a higher risk stock as opposed to a lower risk stock, you would expect ___ return for your investment.

A higher
A lower
The same

Correct Answer

A. A higher

Explanation

When investing in a higher risk stock compared to a lower risk stock, it is expected to yield a higher return for your investment. This is because higher risk stocks have the potential for greater gains, but also come with a higher chance of losses. Investors are compensated for taking on this additional risk by the possibility of higher returns. On the other hand, lower risk stocks offer more stability and lower potential returns.

Rate this question:

5.

If you buy a company's stock...

You have lent money to the company
You own a part of the company
The company will return your original investment to you with interest
You are liable for the company's debts

Correct Answer

A. You own a part of the company

Explanation

When you buy a company's stock, you become a shareholder and therefore own a portion of the company. This means that you have a claim on the company's assets and earnings, as well as the right to vote on certain matters related to the company's operations. Owning a part of the company does not necessarily mean that the company will return your original investment with interest or that you are liable for the company's debts.

Rate this question:

6.

Which are examples of fixed expenses?

Rent, insurance & loan payments
Utilities, rent & restaurants
Music purchases, sports games, insurance
Tuition, rent & concerts

Correct Answer

A. Rent, insurance & loan payments

Explanation

Rent, insurance, and loan payments are examples of fixed expenses because they are recurring costs that do not typically fluctuate in amount from month to month. These expenses are typically set at a fixed amount and are necessary for maintaining a certain standard of living or fulfilling financial obligations.

Rate this question:

7.

If you give something up as a result of making a decision, you are incurring a(n) ______

Liquidity Problem
Net Cost
Opportunity Cost
None of the above

Correct Answer

A. Opportunity Cost

Explanation

When you make a decision to give up something, you are incurring an opportunity cost. This means that by choosing one option, you are forgoing the benefits or opportunities that could have been gained from choosing an alternative option. In other words, the opportunity cost is the value of the next best alternative that is forgone when making a decision.

Rate this question:

8.

Why is your credit score important?

It can affect your interest rates if you have to borrow money for a car or home
It can have an impact on whether you can finance major purchases
It can determine whether you can be approved for credit cards
All of the above

Correct Answer

A. All of the above

Explanation

Your credit score is important because it can affect your interest rates when borrowing money for a car or home. Lenders use your credit score to determine the level of risk you pose as a borrower, so a higher credit score can result in lower interest rates. Additionally, your credit score can impact your ability to finance major purchases, as lenders may be hesitant to provide loans or financing to individuals with lower credit scores. Finally, your credit score can determine whether you can be approved for credit cards, as credit card companies often consider your creditworthiness before issuing a card.

Rate this question:

9.

Which of the following techniques will a bank most likely use to reduce potential risk when giving a credit card to someone with no credit history?

It will charge twice the interest rate it charges other cardholders
It will start the customer off with a smaller line of credit to see how they handle the account
It will require a family member to pledge their home
All of the above

Correct Answer

A. It will start the customer off with a smaller line of credit to see how they handle the account

Explanation

A bank is most likely to reduce potential risk when giving a credit card to someone with no credit history by starting the customer off with a smaller line of credit to see how they handle the account. This approach allows the bank to assess the customer's creditworthiness and financial responsibility before granting them a larger line of credit. By starting with a smaller credit limit, the bank can minimize the potential risk of extending a large credit line to someone with no credit history.

Rate this question:

10.

In the case of Direct Stafford student loans, when are you required to begin paying off your debt?

As soon as you enroll in college
6 months after you leave college or drop below half-time enrollment
When you become employed full-time
Once you are no longer dependent on your taxes

Correct Answer

A. 6 months after you leave college or drop below half-time enrollment

Explanation

Direct Stafford student loans have a grace period of 6 months after you leave college or drop below half-time enrollment before you are required to begin repaying your debt. This grace period allows borrowers to have some time to find employment or adjust to their new financial situation before they start making payments on their loans. Once the grace period ends, borrowers are expected to start making regular monthly payments towards their loan.

Rate this question:

Nuthrive Financial Literacy Quiz

Suppose you deposit $100 in a savings account earning 2% interest a year. After five years how much would you have?

Quiz Preview

In which situation(s) is it smart to borrow money to cover a large expense?

Being on a budget means...

If you invest in a higher risk stock as opposed to a lower risk stock, you would expect ___ return for your investment.

If you buy a company's stock...

Which are examples of fixed expenses?

If you give something up as a result of making a decision, you are incurring a(n) ______

Why is your credit score important?

Which of the following techniques will a bank most likely use to reduce potential risk when giving a credit card to someone with no credit history?

In the case of Direct Stafford student loans, when are you required to begin paying off your debt?