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How Financially Literate Are You?

Test your fin-lit smarts and see how you compare with the general U.S. population!

Quiz Questions

  • 1.
    Suppose you have $1000 you want to invest. Which would be the safer way to invest it?
    • A.
      Put your money in one investment.
    • B.
      Put your money in more than one investment.
      (Correct Answer)
      Explanation: Different investments are subject to different risks. Having multiple investments makes it less likely that all of your investments will be subject to the same gains and losses. This is called diversification, and is often summed up by the old adage 'don't put all your eggs in one basket.'
    • C.
      Don't know.
  • 2.
    Suppose you deposit $100 in a savings account paying 10% interest, compounded annually, and you do not remove any money. How much money will you have in the account after five years if you do not remove any?
    • A.
      More than $150.
      (Correct Answer)
      Explanation: If math was never your favorite subject, or it's just been a few years since you brushed up, this one can be a bit tricky. However, the key here is that your money gets compounded annually, aka every year. So after the first year, you have $110. However, the second year, you are earning 10% interest on $110! Which brings you to $121. And so on... five years later, you have over $150! Or $161.05, to be exact.
    • B.
      Exactly $150.
    • C.
      Less than $150.
    • D.
      Don't know.
  • 3.
    Imagine your savings account is earning 1% per year and inflation is 2% a year, both compounded annually. After one year, how much would you be able to buy with the money in this account?
    • A.
      More than today.
    • B.
      Exactly the same.
    • C.
      Less than today.
      (Correct Answer)
      Explanation: Inflation impacts how much your dollar is worth. Inflation is about how quickly prices are rising (and purchasing power is falling). And if inflation is outpacing your rate of interest, your buying power is going down.
    • D.
      Don't know.
  • 4.
    True or false: A 15-year fixed-rate mortgage typically requires higher monthly payments than a 30-year fixed-rate mortgage, but the total interest over the life of a 15-year will be less than the 30-year.
    • A.
      True
      (Correct Answer)
      Explanation: While a 15-year fixed-rate mortgage typically requires higher monthly payments, you’re paying interest for fewer years. Therefore, you’ll pay less interest on a 15-year mortgage compared to a 30-year mortgage.
    • B.
      False
    • C.
      Don't know.
  • 5.
    True or false: Buying a single company's stock generally provides a lower risk return than an equity exchange-traded fund.
    • A.
      True
    • B.
      False
      (Correct Answer)
      Explanation: This one is also about diversification! Buying a single company's stock is exposing you to only the risk of that company. It's putting all of your proverbial eggs in the same basket. Exchange-traded funds (ETFs) are bundles of securities (i.e. stocks and bonds) and are therefore more diversified than the stock of a single company.
    • C.
      Don't know.
  • 6.
    If you were applying for a loan, would you prefer a lower or higher interest rate?
    • A.
      Lower interest rate
      (Correct Answer)
      Explanation: In this case, interest is the amount of money being added to what you owe. We're guessing you would like to owe as little as possible on your loan, so you probably would prefer a lower interest rate.
    • B.
      Higher interest rate
    • C.
      Don't know.
  • 7.
    If you were signing up for a savings account, would you prefer a lower or higher interest rate?
    • A.
      Lower interest rate.
    • B.
      Higher interest rate.
      (Correct Answer)
      Explanation: An interest rate on a savings account is how much money is being added to your account, expressed as a percentage. This is a case where a higher interest rate is in your benefit.
    • C.
      Don't know.
  • 8.
    Which portfolio has the most aggressive risk level?
    • A.
      80% stocks, 20% bonds
      (Correct Answer)
      Explanation: Stocks are equity investments, and generally have higher risk levels associated with them than bonds (which are debt investments). A portfolio with a higher percentage of stocks generally has a more aggressive risk level.
    • B.
      10% stocks, 90% bonds
    • C.
      50% stocks, 50% bonds
  • 9.
    If you had $1,000 to invest in a moderate risk fund, what would you expect the average rate of return to be after 1 year? (based on historical performance)
    • A.
      0-15%
      (Correct Answer)
      Explanation: Sorry, but based on historical performance, not only is a realistic expectation under 15%, it is more like 3-6%. *
    • B.
      16-30%
    • C.
      31% or more.

Quiz Outcomes

  • 1.
    0 to 2 correct:
    Fin-Lit Fail
    Don't despair! Now you just know how much you don't know, and you're ready to start learning.
  • 2.
    3 to 5 correct:
    Financial Literacy Newbie
    Your financial literacy could use some work. The good news! Stash is investing, simplified.
  • 3.
    6 to 7 correct:
    Fin-Lit Freshman
    Not bad! Not bad at all! You scored as well, or better, than the general U.S. population! But there's still some room for improvement.
  • 4.
    8 to 9 correct:
    You're Fin-Lit!
    Your financial literacy is seriously on point! You scored as well as users of Stash and better than the general population of the United States! Great job!