Financial Literacy Pretest

When deciding which of the two items to purchase, one should always:

• Choose the item that costs less.

• Choose the item with the greatest benefits.

• Choose an item after comparing the costs and benefits of both items.

• Don't know.

Pat and Chris have identical interest-bearing bank accounts that pay them $15 interest per year. Pat leaves the $15 in the account each year, while Chris takes the $15 home to a jar and never spends any of it. After five years, who has more money?

• Pat.

• Chris.

• They both have the same amount.

• Don't know.

Which of the following is the primary function of insurance?

• Making risk disappear.

• Pooling and sharing risk among the insured.

• Making someone else pay for an accident or loss.

• Don't know.

Which of the following has historically had the highest rate of return over long periods of time?

• Bank savings accounts.

• Bonds.

• Stocks.

• Don't know.

Which of the following would be expected to hold its value best during a time of inflation?

• A certificate of deposit.

• A corporate bond.

• A house.

• Don't know.

What is a budget?

• A spending plan showing sources and uses of income.

• A limit on spending that cannot be exceeded.

• The amount of money that a credit card will let you charge without penalties.

• Don't know.

Which of the following would hurt your credit score?

• Closing a long-held credit card account.

• Paying off student loan debt.

• Getting married.

• Don't know.

Which of the following loans is most likely to be classified as "predatory"?

• A high interest rate on a store credit card.

• A cash-back home loan with a higher interest rate taken out after a high-pressure sales pitch.

• A variable interest rate home mortgage that could rise 5 percentage points with inflation.

• Don't know.

Which of the following strategies has shown the highest return over a period of years?

• Moving frequently in and out of the stock market to avoid downturns and exploit upturns.

• Avoiding stocks entirely by keeping money in federally insured bank accounts.

• Buying and holding onto a varied set of stocks, ignoring short-run fluctuations.

• Don't know.

According to car experts, which of the following ordinarily provides the best value in automobile ownership?

• Always buying a new car and driving it only a few years.

• Buying a relatively new used car and driving it for a long time.

• Buying the cheapest used car available.

• Don't know.