Quiz 2 2017: Credit Cards, Credit Reports, Credit Scores And Paying For College
- 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 historyExplanation
The explanation for the given correct answer is that the two most important factors in determining a credit score are the amounts owed and the payment history. The amounts owed refer to the total outstanding debt a person has, including credit card balances, loans, and mortgages. A high amount of debt can negatively impact a credit score. Payment history refers to whether a person has made their payments on time and in full. Late or missed payments can significantly lower a credit score. These two factors are crucial in assessing a person's creditworthiness and determining their credit score.Rate this question:
-
- 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 APRExplanation
Penalty APR refers to the higher interest rate that credit card companies charge to cardholders after a late payment. This penalty is imposed as a consequence for not making payments on time and serves as a deterrent for future late payments. The penalty APR is typically significantly higher than the regular APR and can have a significant impact on the cardholder's overall debt if they continue to carry a balance on their credit card.Rate this question:
-
- 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. TrueExplanation
The "net price" for a college education refers to the actual amount that a student has to pay out of pocket after accounting for any financial aid they receive. This aid can come in the form of scholarships, grants, or loans. Colleges often provide financial aid to students with the greatest financial need in order to make the cost of education more affordable for them. Therefore, it is true that the net price for a college education is often significantly less than the "sticker price" or the cost listed on the college's website or brochure.Rate this question:
-
- 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 aboveExplanation
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. Graduation rates indicate the success and effectiveness of the institution in helping students complete their degree. The availability of the field of study one is interested in is essential to ensure the college offers the desired academic program. Lastly, the quality of the student body, based on test scores, GPA, and selectivity of admissions, reflects the competitiveness and academic caliber of the institution. Considering all these factors together provides a comprehensive evaluation of the college and aids in making an informed decision.Rate this question:
-
- 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 timeExplanation
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 to avoid accumulating interest charges and debt. By paying off the full balance, they can maintain a good credit score and avoid falling into a cycle of debt. Additionally, it promotes responsible financial habits and ensures that they are living within their means.Rate this question:
-
- 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 aboveExplanation
All of the organizations mentioned in the options can see your credit report. Lenders usually check your credit report to assess your creditworthiness before approving a loan. Utility companies may also request your credit report to determine if you need to pay a security deposit. Employers or prospective employers may review your credit report as part of their background check process. Similarly, landlords often check credit reports to evaluate the financial responsibility of potential tenants. Therefore, all of these organizations have the ability to access your credit report.Rate this question:
-
- 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.Explanation
The statement "Since Jasmine has a higher credit score she is likely to pay a lower interest rate" is true because credit scores are often used by lenders to determine the interest rate on a loan. A higher credit score indicates that the borrower is less risky and more likely to repay the loan, so lenders may offer them a lower interest rate. Conversely, a lower credit score suggests a higher risk, so Bill with a lower credit score is likely to pay a higher interest rate on the loan.Rate this question:
-
- 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 cardExplanation
A debit card is not an example of credit because it does not involve borrowing money. When a debit card is used, the funds are immediately withdrawn from the cardholder's bank account, unlike credit where the amount spent is borrowed and needs to be repaid later.Rate this question:
-
- 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 scholarshipsExplanation
Other grants provided by the college/university, Pell Grants, and College scholarships are sources of "free money" that do not need to be repaid. These grants and scholarships are typically awarded based on merit, financial need, or specific criteria set by the college or university. Federal student loans and private loans, on the other hand, need to be repaid with interest.Rate this question:
-
- 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. FAFSAExplanation
In order to qualify for financial aid, prospective college students must file a FAFSA. FAFSA stands for Free Application for Federal Student Aid. It is a form that students must submit to determine their eligibility for federal financial aid, such as grants, loans, and work-study programs. The information provided on the FAFSA is used to assess the student's financial need and determine the amount of aid they may receive. Filing the FAFSA is an important step in the college application process for students seeking financial assistance.Rate this question:
-
- 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
The gains from an investment in a company's stock that trades on a public exchange come from dividend payments and an increase in the stock price. Dividends are a portion of the company's profits that are distributed to shareholders, providing them with regular income. Additionally, if the stock price rises, investors can sell their shares at a higher price than what they initially paid, resulting in capital gains. Both dividend payments and share price appreciation contribute to the overall gains from investing in a company's stock.Rate this question:
-
- 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 accountExplanation
Investing all of your money in a bank savings account is not a rule for creating long-term wealth because savings accounts typically offer low interest rates, which may not keep up with inflation. To generate significant wealth over time, it is important to invest in a diversified portfolio that includes a mix of assets such as stocks, bonds, real estate, and other investment options that have the potential for higher returns.Rate this question:
-
- 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 fundExplanation
Investing in a single company's stock or bonds does not provide diversification because it puts all of the investor's money into one company, making the investment highly dependent on the performance of that specific company. Putting money in a savings account also does not provide diversification as it typically offers low returns and does not involve investing in different assets. On the other hand, buying an S&P500 index fund provides diversification as it represents a portfolio of stocks from 500 different companies, spreading the investment across various sectors and reducing the risk associated with individual companies.Rate this question:
-
- 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&P500Explanation
The correct answer is Facebook, Apple, and S&P500. This is because the question states that the stocks are ranked from HIGHEST return to LOWEST return. Since the question does not provide the actual return percentages for each stock, we cannot determine the exact order. However, we can infer that Facebook has the highest return, Apple has the second highest return, and S&P500 has the lowest return based on the given information.Rate this question:
-
- 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 a credit score. Timely payments demonstrate responsible financial behavior and can positively impact creditworthiness. It shows lenders that you are reliable and capable of managing your debts effectively. This can result in a higher credit score over time, making it easier to qualify for loans and obtain better interest rates. Applying for more credit cards or missing payments can have negative effects on the credit score.Rate this question:
-
- 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 on a $10,000 credit card balance, almost all of the payment will go towards interest. This means that the principal balance will decline very slowly, and it will take many decades to fully pay off the credit card. In fact, over the course of the next 40 years, the individual will end up paying over $60,000 to the credit card company, even before they can pay back the original $10,000. This highlights the long-term and costly consequences of only making minimum payments on credit card debt.Rate this question:
-
- 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 you can earn from a business as the number of units you sell multiplied by the price per unit, minus the total costs. This calculation takes into account both the revenue generated from sales and the expenses incurred in running the business, resulting in the net profit.Rate this question:
-
Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
-
Current Version
-
Mar 17, 2023Quiz Edited by
ProProfs Editorial Team -
Jul 31, 2017Quiz Created by
Tranzetta
Back to top