Quiz 2 2016: Credit Cards, Credit Reports, Credit Scores And Paying For College

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Quizzes Created: 12 | Total Attempts: 5,579
Questions: 17 | Attempts: 120

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Credit Card Quizzes & Trivia

Questions and Answers
  • 1. 

    SELECT TWO ANSWERS.  The two most important factors in determining your credit score are:  

    • A.

      Amounts owed

    • B.

      Length of credit history

    • C.

      Types of credit used

    • D.

      Payment history

    Correct Answer(s)
    A. Amounts owed
    D. Payment history
    Explanation
    The two most important factors in determining your credit score are the amounts owed and payment history. The amounts owed refer to the total amount of debt you have, including credit card balances and loans. This factor is important because it shows how much of your available credit you are using and if you are managing your debt responsibly. Payment history refers to whether you have made your payments on time and in full. This factor is crucial because it demonstrates your ability to repay your debts and reflects your level of financial responsibility.

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  • 2. 

    The higher interest rate (APR) that most credit card companies charge to a cardholder after a late payment: 

    • A.

      Balance transfer APR

    • B.

      Penalty APR

    • C.

      Penalty fee

    • D.

      Cashback reward APR

    • E.

      Purchases APR

    Correct Answer
    B. Penalty APR
    Explanation
    The correct answer is Penalty APR. When a credit cardholder makes a late payment, most credit card companies increase the interest rate they charge on the remaining balance. This increased interest rate is known as the Penalty APR. It serves as a penalty for the late payment and is typically higher than the regular APR.

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  • 3. 

    True or False.  The "net price" (your out-of-pocket expenses) for a college education is often significantly LESS than the "sticker price" due to financial aid provided by the college to reduce the cost to those with the greatest financial need.  

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The "net price" for a college education refers to the actual amount that a student pays after accounting for any financial aid they receive. This aid can come in the form of grants, scholarships, or work-study opportunities. Colleges often provide financial aid to students with the greatest financial need in order to make the cost of education more affordable. Therefore, it is true that the net price for a college education is often significantly less than the "sticker price" or the published cost of attendance.

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  • 4. 

    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 above
    Explanation
    When selecting a college, it is important to consider multiple factors. The "net price" of the college/university is crucial as it determines the affordability and financial burden of attending. Graduation rates indicate the success and support provided by the institution. The availability of the field of study you are interested in is important to ensure that the college offers the necessary programs and resources. Lastly, the quality of the student body, based on test scores, GPA, and selectivity of admissions, can indicate the academic environment and competitiveness of the college. Considering all of these factors is essential in making an informed decision.

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  • 5. 

    What is the best advice you can give a friend about using a credit card?

    • A.

      Pay the minimum payment each month on time

    • B.

      Pay the balance in full every month on time

    • C.

      Use your credit card to take out cash from ATM instead of your debit card since it is cheaper

    • D.

      Be sure to borrow up to your credit limit as it will help your credit score

    Correct Answer
    B. Pay the balance in full every month on time
    Explanation
    Paying the balance in full every month on time is the best advice to give a friend about using a credit card because it helps avoid accumulating interest charges and potential debt. By paying off the full balance, the friend can maintain a good credit score and avoid unnecessary financial stress. It promotes responsible credit card usage and ensures that the friend is not spending more than they can afford to repay.

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  • 6. 

    Which of these organizations can see your credit report?

    • A.

      Lenders you are seeking to borrow from

    • B.

      Utility companies

    • C.

      Employers or prospective employers

    • D.

      Landlord whose apartment you want to rent

    • E.

      All of the above

    Correct Answer
    E. All of the above
    Explanation
    All of the organizations mentioned in the options can see your credit report. Lenders you are seeking to borrow from, utility companies, employers or prospective employers, and landlords whose apartment you want to rent all have the right to access your credit report in order to assess your creditworthiness and make decisions related to lending, employment, or renting.

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  • 7. 

    Jasmine has credit score of 750 and Bill's credit score is 550.  They are each seeking an auto loan of $10,000.  Which statement below is TRUE?

    • A.

      Bill and Jasmine will likely have the same interest rate as banks are forbidden to offer different interest rates on an auto loan.

    • B.

      Since Bill has a lower credit score, he will likely pay a lower interest rate on the loan.

    • C.

      Neither Bill nor Jasmine are likely to be approved for an auto loan given their low credit scores.

    • D.

      Since Jasmine has a higher credit score she is likely to pay a lower interest rate.

    Correct Answer
    D. Since Jasmine has a higher credit score she is likely to pay a lower interest rate.
  • 8. 

    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 card
    Explanation
    A debit card is not an example of credit because it allows the user to make purchases using their own funds from their bank account, rather than borrowing money that needs to be paid back. In contrast, a home mortgage, auto loan, and student loan all involve borrowing money from a lender and paying it back over time with interest.

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  • 9. 

    Select ALL the answers that apply.  Which of the following represent "free money" sources that can help you pay for college that never need to be repaid?  

    • A.

      Federal student loans

    • B.

      Pell Grants

    • C.

      Private loans

    • D.

      Other grants provided by the college/university

    • E.

      College scholarships

    Correct Answer(s)
    B. Pell Grants
    D. Other grants provided by the college/university
    E. College scholarships
    Explanation
    Other grants provided by the college/university, Pell Grants, and College scholarships are all sources of "free money" for college that do not need to be repaid. Federal student loans and private loans, on the other hand, are types of financial aid that need to be repaid.

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  • 10. 

    In order to qualify for financial aid, prospective college students must file a:  

    • A.

      Credit Card application

    • B.

      FAFSA

    • C.

      Credit Report

    • D.

      Magna Carta

    Correct Answer
    B. FAFSA
    Explanation
    To qualify for financial aid, prospective college students must file a FAFSA (Free Application for Federal Student Aid). This form is used to determine the student's eligibility for various types of financial aid, such as grants, scholarships, and loans. It collects information about the student's and their family's financial situation, including income, assets, and household size. Based on this information, the government assesses the student's need for financial assistance and determines the amount and type of aid they are eligible for. Filing a FAFSA is a crucial step for students seeking financial support to afford their college education.

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  • 11. 

    The gains from an investment in a company's STOCK that trades on a public exchange come from:

    • A.

      Dividend and share price appreciation (rise in the stock price)

    • B.

      Return of principal

    • C.

      Dividend

    • D.

      Decline in share price

    Correct Answer
    A. Dividend and share price appreciation (rise in the stock price)
    Explanation
    Investing in a company's stock that trades on a public exchange can provide gains in two ways: through dividends and share price appreciation. Dividends are periodic payments made by the company to its shareholders from its profits. These payments can provide a steady income stream to the investor. Share price appreciation refers to the increase in the stock's price over time. If the stock price rises, the investor can sell their shares at a higher price, resulting in a capital gain. Therefore, the gains from investing in such stocks come from both dividends and the rise in the stock price.

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  • 12. 

    Which of the items below is NOT a rule for creating wealth for the long-term?

    • A.

      Start investing early

    • B.

      Invest over time and don't try and time the market

    • C.

      Invest all of your money in a bank savings account

    • D.

      Diversify your investments

    Correct Answer
    C. Invest all of your money in a bank savings account
    Explanation
    Investing all of your money in a bank savings account is not a rule for creating wealth for the long-term because savings accounts typically offer low interest rates, which means that the growth of your money will be limited. In order to create wealth, it is important to invest in a diverse range of assets that have the potential for higher returns, such as stocks, bonds, and real estate. Diversifying your investments helps to spread risk and maximize potential gains. Starting to invest early, investing over time, and avoiding market timing are all strategies that can help to build long-term wealth.

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  • 13. 

    Through diversification, an investor is seeking to achieve stock market returns with lower risk. Which of the following investments would provide an investor with 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 S&P500 index fund

    Correct Answer
    D. Buying an S&P500 index fund
    Explanation
    Buying an S&P500 index fund would provide an investor with diversification. An S&P500 index fund is a type of mutual fund or exchange-traded fund (ETF) that tracks the performance of the S&P500 index, which represents the 500 largest publicly traded companies in the US. By investing in an S&P500 index fund, the investor gains exposure to a diversified portfolio of stocks across various sectors, reducing the risk associated with investing in a single company's stock or bonds. This allows the investor to achieve stock market returns while spreading out the risk.

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  • 14. 

    InvestmentPurchase PriceCurrent PriceReturn (%age)Apple$100$110?????Facebook$70$80????S&P500$200$210????You have three stocks that you bought earlier this year.  You are looking at their current prices and curious as to how the stocks have performed relative to each other.  You are using their percentage return as your measurement tool.  Rank order the stocks from HIGHEST return to LOWEST return.  Remember to calculate the percentage return for each stock to arrive at your answer.  WebRep currentVote  noRatingnoWeight           

    • A.

      Apple, Facebook and S&P500 all had the same percentage return

    • B.

      Apple, Facebook, S&P500

    • C.

      Facebook, S&P500, Apple

    • D.

      Facebook, Apple and S&P500

    Correct Answer
    D. Facebook, Apple and S&P500
    Explanation
    The correct answer is Facebook, Apple and S&P500. This is because the question asks for the stocks to be ranked in order of highest return to lowest return. To determine the return, we need to calculate the percentage return for each stock. Since the question states that the percentage return for all three stocks is the same, we can conclude that they have all performed equally. Therefore, the order of the stocks does not matter and any of the three could be ranked first. However, in this case, Facebook is listed first, followed by Apple and then S&P500.

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  • 15. 

    Your friend asks you how he can increase his credit score.  What is the best advice that you can give him?

    • A.

      Make on-time payments on all of your loans (credit cards, student loans, auto loans)

    • B.

      Apply for more credit cards

    • C.

      Take out a student loan

    • D.

      Miss a few payments on your loans

    Correct Answer
    A. Make on-time payments on all of your loans (credit cards, student loans, auto loans)
    Explanation
    Making on-time payments on all of your loans, including credit cards, student loans, and auto loans, is the best advice to increase your credit score. Timely payments show responsible financial behavior and help establish a positive credit history. This demonstrates to lenders that you are a reliable borrower and can be trusted with credit. Applying for more credit cards or taking out a student loan may temporarily lower your credit score due to new inquiries and increased debt. Missing payments on your loans will have a negative impact on your credit score as it reflects a lack of financial responsibility.

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  • 16. 

    Recalling the “glass of water” video, if you have a $10,000 credit card balance and you pay only the minimum monthly payment, you can expect which of the following:

    • A.

      The credit card balance will be paid off within 10 years.

    • B.

      By paying the minimum monthly payment required by the credit card company, you are making the best decision because you will have more money each month to spend on other things.

    • C.

      Almost all of your monthly payment will be interest and it will take many decades to pay off the credit card. Over the next 40 years you will pay over $60,000 to the credit card company before you even pay back the original $10,000.

    • D.

      The principal balance on the credit card (the $10,000 balance) will decline very quickly, freeing up credit on the card to buy other things.

    Correct Answer
    C. Almost all of your monthly payment will be interest and it will take many decades to pay off the credit card. Over the next 40 years you will pay over $60,000 to the credit card company before you even pay back the original $10,000.
    Explanation
    By paying only the minimum monthly payment, a significant portion of the payment goes towards interest rather than the principal balance. This means that the credit card balance will take a long time to be paid off, potentially spanning many decades. In fact, over the course of 40 years, the individual will end up paying over $60,000 to the credit card company, which is more than six times the original balance of $10,000. This highlights the importance of paying more than the minimum payment to avoid excessive interest charges and pay off the balance more quickly.

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  • 17. 

    Which of the following describes the total PROFIT you can earn from a business.

    • A.

      The total costs minus the total revenue, or sales.

    • B.

      The number of units you sell multiplied by the price per unit, minus the total costs.

    • C.

      The total revenue, or sales, divided by the number of units you sell.

    • D.

      The amount of money investors give you to start your business.

    Correct Answer
    B. The number of units you sell multiplied by the price per unit, minus the total costs.
    Explanation
    The correct answer describes the total profit as the number of units you sell multiplied by the price per unit, minus the total costs. This formula takes into account both the revenue generated from sales and the expenses incurred in running the business. By subtracting the total costs from the sales revenue, the answer provides a comprehensive measure of the profit earned by the business.

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