1. Financial Education and Career Planning Review Quiz Unit-4 Credit and Credit Cards

2. Question 1 The maximum amount of money a creditor will extend to a customer. A) Loan Term B) Credit Limit C) Grace Period D) Debt

3. Question 2 The length of time given to pay off a loan. A) Loan Term B) Credit Limit C) Grace Period D) Debt

4. Question 3 The total sum of money owned to all lenders by one person (or company). A) Loan Term B) Credit Limit C) Grace Period D) Debt

5. Question 4 The amount of time between using credit and having interest charges accumulate. A) Loan Term B) Credit Limit C) Grace Period D) Debt

6. Question 5 The amount charged by creditor for using their money (interest charged on an outstanding balance) A) Loan Term B) Credit Limit C) Finance Charge D) Debt

7. Question 6 A rating used by credit card companies to decide who to lend money to, or to set the terms under which they will lend money to someone. A) Credit B) Credit Score C) Credit History D) Credit Card

8. Question 7 Using the 20-10 rule, a person earning $2,000 a month should not have monthly credit payments that exceed: Use the 20-10 rule – apply 10% to the monthly income (.10) * ($2,000) = $200 A) $200 B) $20 C) $40 D) $400

9. Question 8 A common advantage of using credit is: A) ability to obtain needed items now B) lower cost for items purchased C) less impulse buying D) lower chance of overspending

10. Question 9 To be within a safe debt load, your total credit should not exceed 20% of your net pay after subtracting rent. This question is false, and is the same as question 14. Rent or mortgage payments are not deducted from income before applying the 20-10 rule.

11. Question 10 If you are denied credit, the creditor is not legally obligated to explain why. This statement is false. A creditor will usually also tell you which credit service provided them with information so that you can request to view the same data.

12. Question 11 Your credit report is available to anyone, regardless of the reason This statement is false, generally you must consent to allow someone access to your credit report, people or companies are not allowed open access to it.

13. Question 12 It is legal for a creditor to deny an applicant credit based on marital status or age. This is a false statement and would represent discrimination

14. Question 13 A steady employment record helps a persons credit history. This is a true statement

15. Question 14 To be within a safe debt load, your total credit should not exceed 20% of your net pay after subtracting rent. A) True B) False Rent or mortgage payments are not deducted from income before applying the 20-10 rule.

16. Question 15 Using the 20-10 rule, a person earning $3,000 a month should not have total debt that exceed: $3,000 * 12 = $36,000 per year. The 20% rule for a person earning $36,000 per year => (.20) * ($36,000) = $7, 200 A) 300 B) 600 C) 6,000 D) 7,200

17. Question 16 George uses his credit card to purchase Celtics playoff tickets and spends $2,000 for four good seats. George has to pay 19.84% interest but figures if he pays $50.00 each month it wont cost him very much in finance charges. At $50 per month how long will it take George to pay off his credit card? A) 40 months B) 44 months C) 55 months D) 66 months E) 77 months

18. Question 17 George uses his credit card to purchase Celtics playoff tickets and spends $2,000 for four good seats. George has to pay 19.84% interest but figures if he pays $50.00 each month it wont cost him very much in finance charges. At $50 per month, how much in finance charges will George pay before his credit card is paid off? A) Approximately$400.00 B) Approximately $1,300 C) Approximately $2,000 D) Approximately$2,700 E) Approximately $3,400

19. Question 17 George uses his credit card to purchase Celtics playoff tickets and spends $2,000 for four good seats. George has to pay 19.84% interest but figures if he pays $50.00 each month it wont cost him very much in finance charges. At $50 per month, how much in finance charges will George pay before his credit card is paid off? At 19.84% and $50 per month George will pay off the credit card in about 65 payments, for a total of $3,250 which represents interest costs of $1,250. The last payment is over by $44.61 so the total cost can be reduced to $3205.39 and the total interest can be reduced to $1205.39. A) Approximately$400.00 B) Approximately $1,300 C) Approximately $2,000 D) Approximately$2,700 E) Approximately $3,400

20. Question 18 George uses his credit card to purchase Celtics playoff tickets and spends $2,000 for four good seats. George has to pay 19.84% interest but figures if he pays $50.00 each month it wont cost him very much in finance charges. If George pays $90.00 per month instead of $50.00 how much money will he save in finance charges to pay off his credit card? A) Approximately $2,500 B) Approximately $1,220 C) Approximately $790 D) Approximately $510 E) Approximately $195

21. Question 18 George uses his credit card to purchase Celtics playoff tickets and spends $2,000 for four good seats. George has to pay 19.84% interest but figures if he pays $50.00 each month it wont cost him very much in finance charges. At 19.84% and $50 per month George will pay off the credit card in about 65 payments, for a total of $3,250 which represents interest costs of $1,250. The last payment is over by $44.61 so the total cost and total interest can be reduced to $3205.39 and 1205.39 respectively. If George pays $90 per month, he will make about 28 payments, which is $2,520 in total payments, and an overpayment of $59.08 on the last payment) to bring the total payments down to $2,460.91, which is $460.91 in interest. George will save 1205.39 - $460.91 = $744.48 in interest charges by making $90.00 monthly payments instead of $50.00. If you didnt adjust for the overpayment of the last payments or rounded differently that was done here, then you might have a slightly lower or slightly higher final answer, but $790.00 should still the be answer to choose. A) Approximately $2,500 B) Approximately $1,220 C) Approximately $790 D) Approximately $510 E) Approximately $195