GEB 3006 EXAM 3 Financial Literacy
UPDATED Exam Questions and CORRECT
Answers
What two factors count for 65% of your FICO score?
a) Income and payment history
b) Employment history and outstanding debts
c) Payment history and outstanding debts
d) Income and outstanding debts - CORRECT ANSWER - c) Payment history and
outstanding debts
Which company has developed the MOST commonly used credit score to evaluate an
individual's credit?
a) Experian
b) Transunion
c) Fair Isaac Corporation
d) Equifax - CORRECT ANSWER - c) Fair Isaac Corporation
You should try to achieve a FICO score of at least ________ in order to receive a top credit
rating.
a) 840
b) 640
c) 760
d) 940 - CORRECT ANSWER - c) 760
What is the debt to credit limit ratio for the following individual?
,Visa CardMaster CardCredit Limit$10,000$20,000Balance Due$2,000$19,000Available
Credit$8,000$1,000
a) 30%, and decreasing this ratio will help the credit score
b) 70%, and decreasing this ratio will help the credit score
c) 70%, and increasing this ratio will help the credit score
d) 30%, and increasing this ratio will help the credit score. - CORRECT ANSWER - b)
70%, and decreasing this ratio will help the credit score
True or False?
It is possible that canceling an old credit card with no balance due could hurt your credit score. -
CORRECT ANSWER - True
True or False?
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. - CORRECT ANSWER - 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?
a) Apply in both spouses names since the banks will use the higher score in evaluating the
mortgage application.
b) Apply in the name of the spouse with the highest score. - CORRECT ANSWER - b)
Apply in the name of the spouse with the highest score.
Which of the following statements is true?
,a) You Answered The treasury yield curve is normally downward sloping, with long term rates
being higher than short term rates.
b) The treasury yield curve is normally upward sloping, with long term rates being higher than
short term rates.
c) The treasury yield curve is normally downward sloping, with short term rates being higher
than long term rates.
d) The treasury yield curve is normally upward sloping, with short term rates being higher than
long term rates. - CORRECT ANSWER - b) The treasury yield curve is normally upward
sloping, with long term rates being higher than short term rates.
True or False?
Having mortgage debt is generally considered better than having credit card debt. - CORRECT
ANSWER - True
True or False?
It is illegal for an employer to review your credit report as part of the application process. -
CORRECT ANSWER - False
True or False?
Insurance companies are allowed to review and consider your credit score before quoting a
premium. - CORRECT ANSWER - True
True or 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. - CORRECT ANSWER -
False
True or False?
In general, applying for and receiving new credit cards will tend to decrease your FICO score. -
CORRECT ANSWER - True
True or False?
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. - CORRECT
ANSWER - False
Interest rates on 30 year fixed rate mortgages tend to follow or correlate with:
a) The 5 year treasury note rate
b) LIBOR
c) The 10 year treasury note rate
d) The 30 year treasury bond rate - CORRECT ANSWER - c) The 10 year treasury note
rate
Interest rates paid by corporations and individual are normally derived from the current:
a) The rate on mortgage backed securities
b) The treasury yield curve
c) ECB funds rate
UPDATED Exam Questions and CORRECT
Answers
What two factors count for 65% of your FICO score?
a) Income and payment history
b) Employment history and outstanding debts
c) Payment history and outstanding debts
d) Income and outstanding debts - CORRECT ANSWER - c) Payment history and
outstanding debts
Which company has developed the MOST commonly used credit score to evaluate an
individual's credit?
a) Experian
b) Transunion
c) Fair Isaac Corporation
d) Equifax - CORRECT ANSWER - c) Fair Isaac Corporation
You should try to achieve a FICO score of at least ________ in order to receive a top credit
rating.
a) 840
b) 640
c) 760
d) 940 - CORRECT ANSWER - c) 760
What is the debt to credit limit ratio for the following individual?
,Visa CardMaster CardCredit Limit$10,000$20,000Balance Due$2,000$19,000Available
Credit$8,000$1,000
a) 30%, and decreasing this ratio will help the credit score
b) 70%, and decreasing this ratio will help the credit score
c) 70%, and increasing this ratio will help the credit score
d) 30%, and increasing this ratio will help the credit score. - CORRECT ANSWER - b)
70%, and decreasing this ratio will help the credit score
True or False?
It is possible that canceling an old credit card with no balance due could hurt your credit score. -
CORRECT ANSWER - True
True or False?
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. - CORRECT ANSWER - 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?
a) Apply in both spouses names since the banks will use the higher score in evaluating the
mortgage application.
b) Apply in the name of the spouse with the highest score. - CORRECT ANSWER - b)
Apply in the name of the spouse with the highest score.
Which of the following statements is true?
,a) You Answered The treasury yield curve is normally downward sloping, with long term rates
being higher than short term rates.
b) The treasury yield curve is normally upward sloping, with long term rates being higher than
short term rates.
c) The treasury yield curve is normally downward sloping, with short term rates being higher
than long term rates.
d) The treasury yield curve is normally upward sloping, with short term rates being higher than
long term rates. - CORRECT ANSWER - b) The treasury yield curve is normally upward
sloping, with long term rates being higher than short term rates.
True or False?
Having mortgage debt is generally considered better than having credit card debt. - CORRECT
ANSWER - True
True or False?
It is illegal for an employer to review your credit report as part of the application process. -
CORRECT ANSWER - False
True or False?
Insurance companies are allowed to review and consider your credit score before quoting a
premium. - CORRECT ANSWER - True
True or 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. - CORRECT ANSWER -
False
True or False?
In general, applying for and receiving new credit cards will tend to decrease your FICO score. -
CORRECT ANSWER - True
True or False?
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. - CORRECT
ANSWER - False
Interest rates on 30 year fixed rate mortgages tend to follow or correlate with:
a) The 5 year treasury note rate
b) LIBOR
c) The 10 year treasury note rate
d) The 30 year treasury bond rate - CORRECT ANSWER - c) The 10 year treasury note
rate
Interest rates paid by corporations and individual are normally derived from the current:
a) The rate on mortgage backed securities
b) The treasury yield curve
c) ECB funds rate
