GEB 3006 exam 3 financial literacy
with complete solutions
What two factors count for 65% of your FICO score? - ANS ✔✔Payment history and outstanding
debts
Which company has developed the MOST commonly used credit score to evaluate an
individual's credit? - ANS ✔✔Fair Isaac Corporation
You should try to achieve a FICO score of at least ________ in order to receive a top credit
rating. - ANS ✔✔760
What is the debt to credit limit ratio for the following individual?Visa Card Master Card Credit
Limit $10,000 $20,000 Balance Due $2,000 $19,000 Available Credit$8,000$1,000 - ANS
✔✔70%, and decreasing this ratio will help the credit score
It is possible that canceling an old credit card with no balance due could hurt your credit score. -
ANS ✔✔TRUE
If an individual gets several quotes on a new mortgage within a two week period, it should not
immediately impact their credit score. The credit score may later be impacted by the size of the
mortgage and related monthly payments. - ANS ✔✔TRUE
A married couple is applying for a mortgage. One spouse has a low FICO score and one has a
high FICO score. What is their best strategy for getting the lowest interest rate possible? - ANS
✔✔Apply in the name of the spouse with the highest score
,Which of the following statements is true? - ANS ✔✔The treasury yield curve is normally
upward sloping, with long term rates being higher than short term rates.
Having mortgage debt is generally considered better than having credit card debt. - ANS
✔✔True
It is illegal for an employer to review your credit report as part of the application process. - ANS
✔✔False
Assume you have three credit cards, each having a balance due of $500 for a total of $1,500.
Each card has a different interest rate ranging from 12% to 20%. The minimum payment on each
card is $10. If the minimum payment is not made, there is a $50 penalty.If you only have $500
to pay on your credit cards this month, the best way to minimize your interest cost is to pay an
equal amount of money on each card. - ANS ✔✔False
Insurance companies are allowed to review and consider your credit score before quoting a
premium. - ANS ✔✔True
In general, applying for and receiving new credit cards will tend to decrease your FICO score. -
ANS ✔✔True
Assume that your parents have more liabilities than assets as a result of a $100,000 of credit
card debt. In the event of their death, the children will inherit the credit card debt. - ANS
✔✔False
Interest rates on 30 year fixed rate mortgages tend to follow or correlate with: - ANS ✔✔The 10
year treasury note rate
Interest rates paid by corporations and individual are normally derived from the current: - ANS
✔✔The treasury yield curve
, At a given interest rate, extending the term of your auto loan from 36 months to 60 months will:
- ANS ✔✔Decrease your payment and increase the amount of interest paid over the loan
Interest rates for corporations and individuals are set based on the Treasury Yield Curve on any
given day. The curve represents the cost of borrowing for the federal government, and - ANS
✔✔Is generally upward sloping, with short term interest rates being lower than long term
interest rates
If we experience a rapid increase in inflation, the Federal Reserve would likely ________ interest
rates. - ANS ✔✔Increase
In the event that you had $10,000 to invest in a bank Certificate of Deposit (CD), what would be
your best course of action in the event that you believed interest rates were likely to increase in
the coming years? - ANS ✔✔Invest in a short term CD and roll it over as it expires to another
short term CD
Borrowing on your 401-K plan is generally considered a good financial move. - ANS ✔✔False
You should always shop for a car loan before seeing the dealer, since the loan rates offered by
dealers can be manipulated against the profit on the car and the value of the trade-in. - ANS
✔✔True
Assume you are using student loans to pay for college. What is the maximum recommended
level of debt you should incur in order to be conservative and ensure that you can afford the
debt payments after graduation? - ANS ✔✔No more than half of your anticipated starting
salary.
Debit cards have fewer protections if lost compared to credit cards, but credit cards can result in
significant financial difficulties for individuals who misuse the card and incur credit card debt. -
ANS ✔✔True
with complete solutions
What two factors count for 65% of your FICO score? - ANS ✔✔Payment history and outstanding
debts
Which company has developed the MOST commonly used credit score to evaluate an
individual's credit? - ANS ✔✔Fair Isaac Corporation
You should try to achieve a FICO score of at least ________ in order to receive a top credit
rating. - ANS ✔✔760
What is the debt to credit limit ratio for the following individual?Visa Card Master Card Credit
Limit $10,000 $20,000 Balance Due $2,000 $19,000 Available Credit$8,000$1,000 - ANS
✔✔70%, and decreasing this ratio will help the credit score
It is possible that canceling an old credit card with no balance due could hurt your credit score. -
ANS ✔✔TRUE
If an individual gets several quotes on a new mortgage within a two week period, it should not
immediately impact their credit score. The credit score may later be impacted by the size of the
mortgage and related monthly payments. - ANS ✔✔TRUE
A married couple is applying for a mortgage. One spouse has a low FICO score and one has a
high FICO score. What is their best strategy for getting the lowest interest rate possible? - ANS
✔✔Apply in the name of the spouse with the highest score
,Which of the following statements is true? - ANS ✔✔The treasury yield curve is normally
upward sloping, with long term rates being higher than short term rates.
Having mortgage debt is generally considered better than having credit card debt. - ANS
✔✔True
It is illegal for an employer to review your credit report as part of the application process. - ANS
✔✔False
Assume you have three credit cards, each having a balance due of $500 for a total of $1,500.
Each card has a different interest rate ranging from 12% to 20%. The minimum payment on each
card is $10. If the minimum payment is not made, there is a $50 penalty.If you only have $500
to pay on your credit cards this month, the best way to minimize your interest cost is to pay an
equal amount of money on each card. - ANS ✔✔False
Insurance companies are allowed to review and consider your credit score before quoting a
premium. - ANS ✔✔True
In general, applying for and receiving new credit cards will tend to decrease your FICO score. -
ANS ✔✔True
Assume that your parents have more liabilities than assets as a result of a $100,000 of credit
card debt. In the event of their death, the children will inherit the credit card debt. - ANS
✔✔False
Interest rates on 30 year fixed rate mortgages tend to follow or correlate with: - ANS ✔✔The 10
year treasury note rate
Interest rates paid by corporations and individual are normally derived from the current: - ANS
✔✔The treasury yield curve
, At a given interest rate, extending the term of your auto loan from 36 months to 60 months will:
- ANS ✔✔Decrease your payment and increase the amount of interest paid over the loan
Interest rates for corporations and individuals are set based on the Treasury Yield Curve on any
given day. The curve represents the cost of borrowing for the federal government, and - ANS
✔✔Is generally upward sloping, with short term interest rates being lower than long term
interest rates
If we experience a rapid increase in inflation, the Federal Reserve would likely ________ interest
rates. - ANS ✔✔Increase
In the event that you had $10,000 to invest in a bank Certificate of Deposit (CD), what would be
your best course of action in the event that you believed interest rates were likely to increase in
the coming years? - ANS ✔✔Invest in a short term CD and roll it over as it expires to another
short term CD
Borrowing on your 401-K plan is generally considered a good financial move. - ANS ✔✔False
You should always shop for a car loan before seeing the dealer, since the loan rates offered by
dealers can be manipulated against the profit on the car and the value of the trade-in. - ANS
✔✔True
Assume you are using student loans to pay for college. What is the maximum recommended
level of debt you should incur in order to be conservative and ensure that you can afford the
debt payments after graduation? - ANS ✔✔No more than half of your anticipated starting
salary.
Debit cards have fewer protections if lost compared to credit cards, but credit cards can result in
significant financial difficulties for individuals who misuse the card and incur credit card debt. -
ANS ✔✔True
