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

A credit score is a numerical rating that lenders use to evaluate the risk of lending money to a borrower based on their credit history and repayment behavior.

Question 2

What is the main purpose of a chequing account?

Accepted Answer

For everyday transactions such as paying bills and making purchases

Answer

Chequing accounts are designed for frequent everyday transactions including paying bills, making purchases, and withdrawing cash.

Question 3

What is interest on a loan?

Accepted Answer

The fee charged by a lender for borrowing money

Answer

Interest is the cost of borrowing money, expressed as a percentage of the principal, paid to the lender over the duration of the loan.

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

Paying only the minimum payment means more interest accumulates on the remaining balance, making the total repayment cost much higher over time.

Question 5

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

Accepted Answer

Annual Percentage Rate

Answer

APR stands for Annual Percentage Rate, which represents the yearly cost of borrowing money including interest and fees expressed as a percentage.

(CAEC) Canadian Adult Education Credential Practice Test

(CAEC) Canadian Adult Education Credential Practice Test

CAEC Financial Literacy and Personal Finance 2