GEB 3006 EXAM 3 FINANCIAL LITERACY QUESTIONS
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 - 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 - 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 - 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. - 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. - 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. - 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. - 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. - 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. -
Answer -True
True or False?
It is illegal for an employer to review your credit report as part of the application process.
- Answer -False
True or False?
Insurance companies are allowed to review and consider your credit score before
quoting a premium. - 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. - Answer -False
True or False?
In general, applying for and receiving new credit cards will tend to decrease your FICO
score. - 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. -
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 - 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
d) Taylor curve - Answer -b) The treasury yield curve
At a given interest rate, extending the term of your auto loan from 36 months to 60
months will:
a) Increase your payment and decrease the amount of interest paid over the loan
b) Decrease your payment and decrease the amount of interest paid over the loan
c) Decrease your payment and increase the amount of interest paid over the loan
d) Increase your payment and increase the amount of interest paid over the loan -
Answer -c) Decrease your payment and increase the amount of interest paid over the
loan
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 - 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 - 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 - 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. - 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. - 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. - 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. - 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. - 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. -
Answer -True
True or False?
It is illegal for an employer to review your credit report as part of the application process.
- Answer -False
True or False?
Insurance companies are allowed to review and consider your credit score before
quoting a premium. - 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. - Answer -False
True or False?
In general, applying for and receiving new credit cards will tend to decrease your FICO
score. - 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. -
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 - 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
d) Taylor curve - Answer -b) The treasury yield curve
At a given interest rate, extending the term of your auto loan from 36 months to 60
months will:
a) Increase your payment and decrease the amount of interest paid over the loan
b) Decrease your payment and decrease the amount of interest paid over the loan
c) Decrease your payment and increase the amount of interest paid over the loan
d) Increase your payment and increase the amount of interest paid over the loan -
Answer -c) Decrease your payment and increase the amount of interest paid over the
loan
