Quiz 2: Paying For College, Credit Cards, Credit Scores and Investing

The explanation for the given correct answer is that the "net price" is the actual amount that a student and their family will have to pay for college after taking into account any financial aid or scholarships they may receive. On the other hand, the "sticker price" is the published cost of attendance before any financial aid is considered. Therefore, the net price is more important to consider as it reflects the actual out-of-pocket expenses for the student and their family.

Taking on a manageable amount of student loan debt is considered acceptable because education is seen as an investment in one's future. The statement suggests that it is generally advisable not to borrow more than one times your expected first-year salary for the job you get after graduating. This implies that borrowing within this limit is reasonable and can be a responsible decision. Therefore, the answer "True" aligns with the explanation provided.

When comparing savings accounts or credit cards, fees can often be an important factor in deciding which product is best for you. This is because fees can significantly impact the overall cost and benefits of the product. For example, high fees on a savings account can eat into the interest earned, reducing the potential savings. Similarly, high fees on a credit card can increase the cost of borrowing and make it less favorable compared to other options. Therefore, considering fees is crucial in determining the best product for one's financial needs.

A borrower with a very high credit score (over 800) is likely to have a higher likelihood of having their credit application approved because they have demonstrated a strong credit history and responsible borrowing behavior. Lenders are more willing to lend to individuals with high credit scores as they are seen as less risky. Additionally, borrowers with high credit scores may also be able to borrow at lower interest rates because they are considered less likely to default on their loans. Lenders offer lower interest rates to borrowers with high credit scores as a reward for their responsible financial behavior.

The given statement is false. Holders of the same credit card brand do not necessarily pay the same interest rate regardless of their creditworthiness. Credit card companies typically determine the interest rate based on the individual's credit history, credit score, and other factors. Therefore, two individuals with the same credit card brand may have different interest rates depending on their creditworthiness.

Hiring a financial advisor does not absolve individuals from paying attention to their financial results. While financial advisors are expected to act in their clients' best interest, it is still important for individuals to stay informed and involved in their financial matters. They should regularly review their investment portfolio, understand the fees and charges associated with their advisor's services, and ensure that their financial goals align with the strategies being implemented. Ultimately, individuals are responsible for their own financial well-being and should actively participate in the management of their money.

When selecting a college, it is important to consider multiple factors. The "net price" of the college/university is important as it determines the affordability and financial burden. Graduation rates indicate the success and effectiveness of the college in helping students complete their degree. The availability of the field of study you are interested in is crucial to ensure that the college offers the right academic program. Lastly, the quality of the student body based on test scores, GPA, and selectivity of admissions reflects the overall academic environment and competitiveness of the college. Considering all of these factors is essential for making an informed decision.

If you plan to carry a balance on your credit card and not pay it off every month, the most important factor for you in selecting a credit card would be the interest rate. This is because the interest rate determines how much you will be charged for carrying a balance on your card. A higher interest rate means you will be paying more in interest charges, while a lower interest rate will save you money in the long run. Therefore, selecting a credit card with a low interest rate would be the most beneficial option for someone who plans to carry a balance.

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 loan default rate. These statistics indicate that State U may not be a good choice for higher education. Therefore, it would be wise to immediately research additional schools and consider other options rather than applying to State U.

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, rather than being borrowed and paid back over time like a home mortgage, auto loan, or student loan. Debit cards are linked directly to the cardholder's own funds and are used for making purchases or withdrawing cash.

Pell Grants, Cal Grants (for California students who stay in-state), scholarships, and institutional grants are all sources of "free money" that can help pay for college and do not need to be repaid. These sources provide financial assistance to students without the expectation of repayment, making them valuable resources for funding higher education.

To qualify for financial aid, prospective college students must file the FAFSA. FAFSA stands for Free Application for Federal Student Aid. This application is used to determine a student's eligibility for federal grants, loans, and work-study programs. It collects information about the student's and their family's income, assets, and other factors to assess their financial need. By filing the FAFSA, students can access various forms of financial assistance to help cover the costs of their education.

Paying all of your bills on-time can improve your credit score because payment history is a significant factor in determining creditworthiness. Lenders and credit bureaus consider whether you make your payments on time, as late or missed payments can negatively impact your credit score. By consistently paying your bills on-time, you demonstrate responsible financial behavior and reliability, which can positively impact your creditworthiness and improve your credit score over time.

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 paying the minimum amount, the remaining balance will continue to accrue interest over time. As a result, it will take a longer time to pay off the debt, and the interest will accumulate, leading to a higher overall payment to the credit card company.

All of the organizations mentioned in the options can see your credit report. Lenders, utility companies, employers, and landlords who you want to rent an apartment from can access your credit report to assess your financial responsibility and creditworthiness. They use this information to make decisions regarding lending money, providing services, offering employment, or renting property.

Making a late payment on your credit card can have several consequences. Firstly, you will be charged a late payment fee of $35. Additionally, your credit card company may increase your interest rate to the Penalty APR rate, which is significantly higher than your current rate. This can result in higher interest charges on your outstanding balance. Moreover, your credit score may go down as a result of the poor payment history, which can make it harder for you to obtain credit in the future. Therefore, the possible consequences of making a late payment on your credit card are A, B, and D.

The savvy consumer should ask how long the introductory offer will last to determine the duration of the benefits. They should also inquire about the APR and cashback rewards after the introductory period to understand the long-term value of the program.

School B would be considered more selective based on their acceptance rates. With an admission rate of only 7%, School B is much more exclusive and harder to get into compared to School A, which admits 64% of students who apply. This means that School B has a more rigorous selection process and is more likely to have higher academic standards and stricter admission criteria.

The correct answer is "Your credit score is based on the information found in your credit report." This statement is true because credit scores are calculated based on the information in your credit report, such as your payment history, credit utilization, length of credit history, and types of credit used. Lenders and financial institutions use credit scores to assess an individual's creditworthiness and determine their likelihood of repaying debts. Therefore, it is crucial to maintain a good credit score by managing your credit report effectively.

The range of FICO (credit) scores that a consumer can have is 300 to 850. This means that the lowest possible score a consumer can have is 300, while the highest possible score is 850.

Investing in a college education makes sense because workers with college degrees tend to earn higher salaries and are more likely to secure employment compared to those with only a high school degree. This suggests that obtaining a college degree can lead to better job prospects and financial stability.

The given correct answer suggests that all of the mentioned psychological tactics were seen in the video. The video portrayed the psychological tactic of people feeling compelled to keep up with their peers and take risks to achieve wealth. It also showed the human nature of wanting something that is in demand and creating a sense of urgency. Additionally, the video highlighted the willingness of investors to trust confident "experts" who are selling a financial product.

Buying a mutual fund that holds the stock in fifty companies would provide an investor with diversification. Diversification refers to spreading investments across different assets or securities to reduce risk. By investing in a mutual fund that holds the stock in fifty companies, the investor's money is spread across a diverse range of companies and industries. This helps to mitigate the risk associated with investing in a single company's stock or bonds, or putting all the money in a savings account, which offers limited diversification.

Negative information such as late payments or collection accounts stays on your credit report for a period of 7 years. This means that lenders and creditors can see this negative information when evaluating your creditworthiness for that duration. It is important to maintain a good credit history and make timely payments to avoid negative impacts on your credit report.

A higher FICO score indicates a better credit history and financial responsibility. Lenders consider borrowers with higher credit scores to be less risky and more likely to repay their loans on time. As a result, borrowers with higher FICO scores are more likely to qualify for lower interest rates on their loans. This is because lenders are willing to offer better terms to borrowers who are perceived as less likely to default on their loan payments.

If you plan to pay off your credit card every month and will not be a revolver, 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 carrying a balance and incurring interest charges, the interest rate becomes less relevant. Instead, you can focus on maximizing the benefits you can receive from the credit card, such as cashback, travel rewards, or other incentives. The quality of credit card commercials and the location of the company headquarters are not significant factors in this scenario.

Penalty APR refers to the higher interest rate that credit card companies charge to a cardholder 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. It is a way for credit card companies to compensate for the increased risk they face when customers do not meet their payment obligations.

Ten years ago, the investor bought 100 shares of Home Depot for $20.00 per share, resulting in a total investment of $2,000. Today, the share price has increased to $35.00 per share. Therefore, the current value of the investor's 100 shares is $3,500. The capital gain "on paper" is the difference between the current value of the shares and the initial investment, which is $3,500 - $2,000 = $1,500.

School A offers more financial aid to students to help lower the cost of education because its net price for families with income less than $30,000 is $6,000, which is lower than School B's net price of $11,000.

Private student loans typically have higher interest rates and less flexible repayment options compared to federal student loans. Federal student loans often have fixed interest rates and offer various repayment plans, including income-driven options. Additionally, federal loans may provide loan forgiveness or discharge options in certain situations. Therefore, the statement that private student loans offer better payment terms and lower interest rates than federal student loans is false.

Credit card companies often use professional athletes or other celebrities in their commercials as a marketing strategy. This is because these individuals are seen as influential and aspirational figures, and their endorsement can help create a positive image for the credit card brand. By associating their product with well-known personalities, credit card companies aim to make their cards more appealing and increase their customer base. This strategy leverages the popularity and credibility of celebrities to attract potential customers and build brand recognition.

A cash advance refers to the act of using a credit card at an ATM to withdraw cash. It typically incurs immediate interest charges without any grace period. Additionally, cash advances usually have higher interest rates compared to regular credit card purchases. Therefore, the correct answer is "All of the above."

The answer suggests that the lesson learned in the Investment Game is that people tend to feel the negative impact of losses more strongly than the positive impact of gains. This implies that individuals are more risk-averse and are more likely to avoid losses rather than seek out potential gains.

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 slow. To create wealth for the long-term, it is important to invest in a diversified portfolio of assets that have the potential for higher returns, such as stocks, bonds, real estate, or mutual funds. Diversification helps to spread out risk and increase the chances of earning higher returns over time.

All of the statements provided are true about 401K plans. It is beneficial to start saving immediately in a 401K plan due to the compounding effect over time. Many companies offer a matching contribution to employees' 401K plans. A 401K plan is portable and remains with the employee even after leaving the company. Additionally, a 401K plan is a retirement savings plan that individuals contribute to through deductions from their payroll.

The explanation for the given answer, False, is that the statement is incorrect. The stock market does not guarantee a fixed 8% annual return that can be counted on every year with little to no variation. The stock market is known for its volatility, and returns can vary significantly year to year. While the long-term average returns of the market may be around 8%, it is important to note that this is an average and not a fixed return.

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 credit you are currently using and how well you manage your debt. Payment history is also crucial as it reflects your ability to make timely payments on your debts. Lenders consider this factor to assess your reliability and trustworthiness in repaying borrowed money.

The correct answer is Equifax, TransUnion, and Experian. These three companies are credit reporting agencies that collect and maintain credit information on individuals and businesses. They gather data from various sources such as lenders, creditors, and public records, and use this information to generate credit reports and credit scores. These reports and scores are then used by lenders, landlords, and other entities to assess an individual's creditworthiness and make decisions regarding loans, credit cards, and other financial transactions.

An investment in a company's stock that trades on a public exchange can provide gains in the form of dividends and share price appreciation. Dividends are periodic payments made by the company to its shareholders, usually out of its profits. Share price appreciation refers to an increase in the stock price over time, which can result in capital gains if the investor sells the shares at a higher price than they were purchased for. Both dividends and share price appreciation contribute to the overall returns from investing in a company's stock.

The range of interest rates that Wells Fargo VISA cardholders would have is 8.99% to 25.99%. This is because the interest rate is calculated by adding the Prime Rate (currently 3.25%) to the range of percentages disclosed, which is 5.74% to 22.74%. Therefore, the lowest possible interest rate would be 3.25% + 5.74% = 8.99% and the highest possible interest rate would be 3.25% + 22.74% = 25.99%.

annualcreditreport.com is the correct answer because it is the only website mentioned that provides consumers with free credit reports from each of the three credit bureaus on an annual basis. The other websites mentioned may provide credit reports or scores, but they do not specify that they offer reports from all three bureaus or on an annual basis.

The gains from an investment in a bond would include the coupon, which is the interest payment received periodically, and the return of principal, which is the repayment of the initial investment amount at maturity. These two components represent the income and the return of the invested capital, respectively, making them the correct answer.

The "new school" of retirement planning emphasizes that retirement plans stay with the employee even if they leave the company, so they do not lose those funds. This characteristic is not associated with the "new school" of retirement planning.

When selecting a credit card, one should not consider whether the card is FDIC-insured. This is because FDIC insurance is relevant for bank deposits, not credit cards. FDIC insurance protects depositors in the event of a bank failure, ensuring that their deposits up to a certain limit are safe. However, credit cards are not deposits, so FDIC insurance does not apply to them. Therefore, it is not a factor to be considered when choosing a credit card.

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