Quiz Questions on Financial Fundamentals

Explain the Benefits of Keeping Your Money in a Bank or Credit Union, as Opposed to an Envelope Under Your Bed.

Answer: Keeping money in a bank provides insurance, security, interest, convenience, credit access, and financial services, whereas storing it at home lacks these benefits and risks loss or theft.

Imagine Your Only Available Credit is a Credit Card With a Limit of $2,000. If You Have a Balance of $750, What is Your Credit Utilization Percentage?

Answer: 37.5%

Explanation: 1. Balance: $750

                       2. Credit Limit: $2,000

                       3. Credit Utilization Percentage: (Balance / Credit Limit) x 100

                       4. Calculation: (750 / 2,000) x 100 = 0.375 x 100 = 37.5

Therefore, with a $750 balance on a credit card with a $2,000 limit, your credit utilization percentage is 37.5%.

What is the Correct Definition of Character for Potential Cosigners?

Answer: A cosigner's character is judged by financial reliability and credit history.

Explanation: For potential cosigners, "character" denotes their creditworthiness, reliability in making timely payments, and responsible financial management. Lenders evaluate credit scores, payment history, and overall financial stability to assess an individual's suitability as a cosigner.

Which of the Following Deductions Are You Most Likely to See on Your Pay Stub?

A) Health Insurance Deduction.

B) Office Cupcake Deduction.

C) Social Security Deduction.

D) Municipal Tax Deduction.

Answer: C) Social Security Deduction.

Explanation: The Social Security Deduction (C) is the primary deduction you're likely to find on your pay stub, supporting programs like retirement benefits. Health Insurance Deduction (A) is common for coverage, while deductions like Office Cupcake (B) and Municipal Tax (D) are less likely, depending on workplace policies and local taxes.

Provide Three Reasons Why It is Important to Start Establishing Credit History as Early as Possible.

Answer: Here are three pivotal reasons why initiating credit history early is essential:

• Faster Credit Building: Starting early expedites the development of a strong financial profile.
• Lower Interest Rates: A progressively higher credit score leads to reduced interest rates,resulting in savings on loans and credit.
• Unlocking Savings Opportunities: Early credit establishment opens doors to diverse savings, providing better financial terms and increased flexibility.

Why Should You Review Your Credit Report Regularly? Choose Two Correct Answers.

a. To monitor how different factors are impacting your FICO score

b. To increase your credit views, which automatically increases your credit

score

c. To check your credit report for accuracy

d. To open additional loans and lines of credit

Answer: a. To monitor how different factors are impacting your FICO score

               c. To check your credit report for accuracy

Explanation: Regularly reviewing your credit report is crucial for two main reasons: 

a. To monitor how different factors are impacting your FICO score: Understanding the influence of factors like payment history and credit utilization helps you take informed actions to improve your creditworthiness.

c. To check your credit report for accuracy: Identifying and disputing errors ensures that your credit report reflects your true credit history, preventing inaccuracies from negatively affecting your credit score.