A simple investment test most Floridians don't do well on
By Dian Vujovich
There were five questions in FINRAs investor quiz published last year and when all was said and done, Floridians answered only three out of the five correctly. So much for a savvy group of investors.
Compare Florida’s results with those from other states and turns out the folks in New York, New Jersey and New Hampshire are the most financially literate. Those in Kentucky and Montana scored the poorest.
When looking at money smarts and age differences, younger American’s out-smarted older ones.
“This study highlights how important improving financial education is for Americans, especially during times of financial insecurity,” said FINRA Foundation Chairman Rick Ketchum. “While the current economic conditions can exacerbate the consequences of poor financial decisions, some states are still well ahead of others.”
I’m figuring that you can hardly wait to take this test to find out where you stand with respect to others in Florida or New York, for that matter. So to test your financial literacy smarts, here are the five questions:
1.Suppose you have $100 in a savings account earning 2 percent interest a year (Wouldn’t that be nice!) Anyhow, after five years would you have: A) more than $102; B) exactly $102; C) less than $102 or D) don’t know.
2.Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy: A) more that it does today; B) exactly the same; C) less than today; or D) don’t know.
3.If interest rates rise, what will typically happen to bond prices? A) rise; B) fall; C) stay the same; D) there is no relationship.
4.True or False: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less. T or F?
5.True or false: Buying a single company’s stock usually provides a safer return that a stock mutual fund? T or F?
Because I know faithful readers of this blog know a thing or two about money and investing, I’m expecting all of you to score 100. As in, answer all five questions correctly. Here are the answers: 1. A, more; 2. C. less; 3. B. Fall; 4.True; and 5. False.
The average soul gets three correct.
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