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Financial Literacy Answers

Answers to the “Big Three” financial literacy questions.

 

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?”

A) More than $102
B) Exactly $102
C) Less than $102
D) Don’t know
E) Refuse to answer

 

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

A) More than today
B) Exactly the same as today
C) Less than today
D) Don’t know
E) Refuse to answer

 

3) “Do you think the following statement is true or false?
Buying a single company stock usually provides a safer return than a stock mutual fund.”

A) True
B) False
C) Don`t know
D) Refuse to answer

 


Answers to the “Big Five” financial literacy questions.

 

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?”

A) More than $102
B) Exactly $102
C) Less than $102
D) Don’t know
E) Refuse to answer

 

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

A) More than today
B) Exactly the same as today
C) Less than today
D) Don’t know
E) Refuse to answer

 

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

A) They will rise
B) They will fall
C) They will stay the same
D) There is no relationship between bond prices and the interest rate
E) Don’t know
F) Prefer not to say

 

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.

A) True
B) False
C) Don’t know
D) Prefer not to say

 

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

A) True
B) False
C) Don’t know
D) Prefer not to say