Personal Finance Quiz

[jeffrey]

Only 14 percent of Americans correctly answered all five questions in a survey of financial literacy that was released May 30.

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

•More than $102
•Exactly $102
•Less than $102

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

•More than today
•Exactly the same
•Less than today

3. If interest rates rise, what will typically happen to bond prices?

•They will rise
•They will fall
•They will stay the same
•There is no relationship between bond prices and the interest rate

4. A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.

•True
•False

5. Buying a single company’s stock usually provides a safer return than a stock mutual funds

•True
•False

http://www.businessweek.com/articles/2013-05-31/americans-flopped-this-personal-finance-quiz-dot-can-you-do-better

(Answers at bottom of article)

[disneysteve]

Yay! I got them all right.

[phantom]

Looking at the percentages for each response actually makes me feel relatively good about people's financial knowledge. It looks like most people had questions with #3, which in my mind is the most obscure and least useful bit of knowledge, and very few people got the other questions wrong, they just admitted they didn't know. It's nice to see that, for the most part, people at least know what they don't know.

Edit: I just went back and actually read the article. It is a bit odd that these same people all thought they were pretty knowledgeable about finances.

[lorraineb]

Those were pretty basic questions. I would think the percentage getting all five correct would be much higher, but maybe I am too optimistic at the financial literacy of most people.