CAEC Financial Literacy and Personal Finance 2

Question 1

What is a credit score primarily used for?

Accepted Answer

To assess how likely you are to repay borrowed money

Answer

To determine how much you owe in income taxes

Answer

To measure your total personal net worth

Answer

To calculate your recommended monthly budget

Question 2

What is the main purpose of a chequing account?

Accepted Answer

For everyday transactions such as paying bills and making purchases

Answer

To earn the highest possible interest on long-term savings

Answer

To invest money in stocks and mutual funds

Answer

To store retirement savings tax-free

Question 3

What is interest on a loan?

Accepted Answer

The fee charged by a lender for borrowing money

Answer

A penalty charged for paying a loan back too early

Answer

The original principal amount that was borrowed

Answer

A government tax applied to all financial transactions

Question 4

Why is it important to pay more than the minimum payment on a credit card balance?

Accepted Answer

It reduces the total amount of interest paid over time

Answer

It automatically improves your chequing account balance

Answer

It immediately increases your available credit limit

Answer

It lowers your annual income tax obligation

Question 5

What does APR stand for in the context of loans and credit cards?

Accepted Answer

Annual Percentage Rate

Answer

Annual Payment Requirement

Answer

Applied Percentage Rate

Answer

Authorized Payment Record

Question 6

What is overdraft protection on a bank account?

Accepted Answer

A feature allowing transactions to proceed even when the account balance is insufficient, up to a set limit

Answer

Insurance that reimburses funds stolen by fraud

Answer

A savings account automatically linked to stock market investments

Answer

A service that blocks all transactions when the balance is low

Question 7

What is the key difference between a secured and an unsecured loan?

Accepted Answer

A secured loan requires collateral; an unsecured loan does not and typically has a higher interest rate

Answer

A secured loan is only available to businesses; an unsecured loan is for individuals only

Answer

A secured loan comes from a bank; an unsecured loan comes from the government

Answer

A secured loan has flexible repayment terms; an unsecured loan has only fixed terms