16. Select the statement below that accurately describes a characteristic of a credit card.

Making full payments on-time every month is the only way to avoid interest charges

You owe the same payment every month

You must have money deposited into a checking account to use the credit card for purchases

17. Which of the following statements is CORRECT about secured loans?

If the borrower does not make payments, the lender can repossess the item

They are a good choice to use for student loans

In the event of default, the borrower loses nothing except for the down payment

They usually have higher interest rates as compared with unsecured loans

18. An excellent credit score will help with which aspect of car financing?

Qualifying for a low interest rate

Bargaining for a great sales price

Having a wide selection of term lengths

19. As a young adult, all of the following are good strategies for building credit, EXCEPT:

Open a credit card, with your parent or guardian as a cosigner

Become an authorized user on a credit card used by your parent or guardian

Open and use a secured credit card

21. Why are payday loans so much easier to qualify for than traditional bank loans?

Payday loans require proof of employment or other regular income but not a credit check

Payday loans are only used by affluent households, and the banks know they have enough money to cover them

Payday loans are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck

Payday loans are typically for such small dollar amounts that no one cares if you repay them or not

22. Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?

A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller

A specific type of tax advantaged bank account used for saving money to buy a house

The first year’s worth of property taxes, held in reserve

A prepayment to a real estate agent so that they will start helping you house hunt

25. Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

This enables the credit card company to make more money

This is required by federal law for tax purposes

This allows the card holder to pay their bill quickly and close the card when they’re ready

This helps cardholders develop financial independence

26. What are the two most important factors in calculating your credit score?

Payment history and types of accounts

Amounts owed and length of credit history

Length of credit history and new credit inquiries

29. All of the following would show up on a credit report EXCEPT...

Payment history of your car loan

32. Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?

Ask his parents to cosign a credit card or add him as an authorized user on their credit card

Always say "credit" when asked "credit or debit?" at a store

Any time he borrows money from a friend or family member, be sure to pay it back promptly

Take out some private student loans, even though he doesn't need them because he has grants and scholarships

33. Which of the following individuals or groups would be the LEAST likely to look at your credit score?

A bank representative who is helping you open a savings account

Someone interviewing you for a job

An insurance company reviewing your applicant for auto insurance

35. You have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the GREATEST positive impact?

Use less than 30% of the credit limit and pay it off in full every month by the due date

Always carry a balance from month to month

Regardless of how much your balance is, make the minimum payment required on your credit card every month by the due date

Put the credit card in a drawer instead and don't ever use it

37. Who tracks all of your credit information?

Credit reporting agencies (Equifax, Experian and TransUnion)

Consumer Financial Protection Board (CFPB)

38. What is the general timeline to establish your first credit score?

Six months after you first actively use your credit

As soon as you apply for a credit card or loan

Once you pay all of your credit balances in full

40. Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?

An explanation of the mistake and any evidence you have supporting your claim

Your preferred payment method to pay for fixing the error

A list of all of your financial accounts and balances

References from a non-family member vouching for your creditworthiness

41. Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?

Applying for multiple credit cards

Paying down balances on your credit card accounts

Decreasing your utilization of credit

42. Which best describes the Debt Snowball method for paying off debt?

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance

Only make payments on your smallest debt first, then move on to your second smallest debt, and so on

Once your debt "snowballs" out of control, hire a certified credit counselor to help get your finances back on track

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the highest balance

43. Which of these represents a potential consequence of neglecting to pay your federal student loans?

Wages or tax refunds can be garnished

44. What benefits do you receive by taking out a loan with a cosigner?

You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit

You don’t get penalized for late payments

You get a discount on future loans after this one is paid off

You automatically get the same credit score as the cosigner once the loan is paid off

46. Which response best completes the sentence "It's best to begin establishing credit when you're young because ________" ?

You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card

Accessing credit only becomes more expensive as you get older

Negative marks on your credit report go away faster for younger borrowers

Credit scores are free for anyone under the age of 25

50. How can your credit score impact your financial well-being?

Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be

Only consumers with high scores are approved for credit

Consumers with low scores get lower interest rates on loans than those with high scores

It generally has no impact on your financial situation

1. What is an insurance premium?

Your monthly payment to your insurer, regardless of whether you use any services

A list of the procedures covered by your insurance carrier

An added cost you pay in order to receive higher-quality services

The amount you pay out-of-pocket for a specific procedure or service

3. When setting your premium, your car insurance company may consider each of the following EXCEPT...

How many miles you drive per year

4. Insurance companies make money by...

Collecting more in premiums than they need to pay out each year

Refusing to pay out claims to policyholders

Collecting money from the government

Keeping costs low with minimal advertising

8. Why would someone choose to get long term disability insurance even if they already have health insurance?

Health insurance only covers medical bills, while long term disability will help compensate for lost work with a percentage of their income

Long term disability only covers medical bills, while health insurance will help compensate for lost work with 40-60% of their income

Long term disability insurance plans can also extend coverage to family members and pets

Health insurance only covers regular check ups, while long term disability insurance also covers emergencies

12. Medicaid generally provides insurance for which of the following groups of people?

Individuals in low-income households

Anyone who wants to buy coverage from the Marketplace

Employees who have a government position

13. Your employer offers an employer-sponsored health insurance plan. Which of the following statements is TRUE?

Your health insurance premiums will be paid directly from your paycheck, pre-tax

You can only see doctors who are also employees of the same company

Your employer cannot fire you if you get sick or injured because you have employer-sponsored health care

You can remain on that health insurance plan even if you switch jobs

15. What type of auto insurance are you required to carry in almost every state (49 out of 50)?

Insurance if you cause injury to another person

Insurance if you damage your own property

Insurance in case you get into an accident with someone who does not have insurance

Insurance if you cause injury to yourself

16. Bruce has just graduated from college and decides that instead of paying for insurance, he'll work on building up his emergency fund. This way, if something goes wrong, he can just pay for it using cash. Why is this a risky idea?

An accident or illness can strike at any time and be quite expensive, so it's possible he'd need a big sum of money well before his emergency fund was large enough

It is mandatory to have auto, health, life, disability, and renters/home insurance, so he'll have to pay 5 penalties per year for not enrolling in these insurance types

Having insurance not only protects you financially, but also physically, so he'll be less likely to experience illness or accident if he has insurance

The sooner he starts paying for insurance, the sooner he will reach his maximum lifetime requirement and can stop paying altogether for coverage

17. Your parents tell you that on your 22nd birthday, they would like for you to get your own health insurance. You are very healthy, are not taking any prescription medicines, and generally only see your doctor for your annual physical. What type of health insurance is likely to be best for you?

A high deductible plan with a low monthly premium

A low deductible plan with a high monthly premium

Your parents MUST keep you on their plan. They cannot legally remove you.

You do not need health insurance because you are healthy

20. In general, how do insurance companies decide how much to charge an individual for their monthly premiums?

The company assesses the individual's risk factors and assigns higher premiums to higher risk individuals

The company looks at the individual's tax filings from the previous year to assess overall wealth and ability to pay

The company charges the same premium for every individual eligible for coverage

The company increases or decreases premium rates based on the stock market

21. Which of the following insurance coverage options would be the lowest priority for a typical single person, with no children, 1-2 years out of high school?

Auto Insurance (if they have a car)

Renter's Insurance (if they are renting an apartment)

23. A standard renters insurance policy would cover each of the following EXCEPT…

A new window when a baseball breaks the original one

A small TV and some sneakers, stolen in a robbery

A lawsuit brought when a visitor hits their head on a low hanging light fixture

A week of hotel reservations when the tenant has to move out due to fire damage

24. Finn moves from a rented apartment into his very first house. What should he expect regarding the cost of homeowners insurance compared to renters insurance?

His homeowners insurance will be MORE expensive than his renters insurance was

He will not need homeowners insurance, because owning a home is less risky than renting

His homeowners insurance will be LESS expensive than his renters insurance was

His homeowners insurance will be the same cost as his renters insurance was

Personal Finance Final Quiz

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

All 3 cards are completely different

Debit cards and prepaid debit cards are the same

Debit cards and credit cards are the same

All 3 cards are completely the same

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2. The average APR for a payday loan is closest to …

4%

14%

40%

400%

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

3. Which of the following statements comparing credit and debit cards is TRUE?

Far more businesses accept credit cards than debit cards

Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

Credit card companies provide you with a monthly statement, while debit cards do not

With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

4. Which of the following is most likely to represent a fixed rate, secured debt?

A student loan

A credit card

A prepaid debit card

An auto loan

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

5. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan

Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

6. If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

Explore whether a free or non-profit credit counseling service could help

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

8. Which of the following is true about fixed and adjustable-rate mortgages?

Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan

Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

The two mortgages work the same way but are called different names depending if they come from a bank or a credit union

8.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

10. Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?

The minimum monthly payment for payday loans is usually only $10 or $15, so a lot of interested accumulated

Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway

Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times

Denise not only paid the $300 she owed, but she prepaid an extra $450 in case she needs another loan in upcoming months

9.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

12. Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed

Your APR will be within that range, depending on the strength of your credit history

In this case, you want the highest APR in the range because you’ll earn more

The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

10.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

13. What is an advantage of using a credit card?

It will not affect your credit score or credit history

Since it is tied directly to your checking account, it prevents you from spending money you do not have

If you need to carry a balance, the interest rates are generally quite low (less than 5%)

You can make an emergency purchase that you otherwise don’t have the money to pay for right now

Personal Finance Final

70 questions

1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

2. The average APR for a payday loan is closest to …

3. Which of the following statements comparing credit and debit cards is TRUE?

4. Which of the following is most likely to represent a fixed rate, secured debt?

5. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

6. If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

8. Which of the following is true about fixed and adjustable-rate mortgages?

10. Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?

12. Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

13. What is an advantage of using a credit card?

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