Source: time.com/4403643/american-financial-literacy-test-fail

The test: usfinancialcapability.org/quiz.php

Explanation to the questions by @etant
1\. Interest rate means they are going to pay you for the percentage of money you have deposited. So after second year you would have 102 in your account, so its def going to be more then 102 after 5 years.

2\. Inflation in this case means the percentage of everyday things that got more expensive over a time period (a 100$ in 1950s worth a lot more then today because of inflation). So if inflation is higher then interest rates then you would have less money then you've had.

3\. This is a tricky one, I wouldn't expect everyday people to get. Here is an example, you get price of bond of 100 dollars, rates at 1 percent per year, so you are suppose to get 1 dollar per year. If rates raise to 2 percent, in order for you to get the same amount of 1 dollar, the price of the bond need to drop to 50 . This is not how it actually works because you get paid back the original money you put in but yall get the idea. The markets need to make the same bond equally attractive.

4\. You have to pay back a sum of money in 15 or 30 years. There will be interest fee for each dollar you didn't pay back, so longer you wait to pay back the more interest. So even you pay more yearly with 15 years, you will pay less interest.

5\. Here they weren't clear about what is a mutual fund, but think of a fund like the S&P500 ( a basket of companies) so instead of betting on one company you are betting on a bunch of them. So you are betting on the fact that overall companies are going to do well, instead of betting on one. So in that sense it is safer, as you wouldn't know what is the next tesla or google.

6\. This is the most important concept of investing. Which is why you should invest early. Think about it for a min and refresh your 5th grade math. year 1: 100\*1.2 = 120 year 2: 120\*1.2 = 144 year 3: 144\*1.2 = 172.8 year 4: 172.8\*1\. = 207.36

It only took 4 years to double your money. If you were only earning 7% per year ( avg return of S&P500) it would take around 10 years to double your money. That's insane. Do you see the power of that, its called the power of compound interest, as Einstein said it " compound interest is the most powerful force in the universe"

Yea I’m not a dumb FUKK

Prove it

got 4/0/2

gonna take after this movie

be my tutor

Which questions did you get wrong?

yeah i'm definitely too stupid for this

s*** I dont know if we had the same questions but the last 2

Lmao I beat the national average by 1 point

I’m financially literate...barely

That was easy as s*** lmao I thought it would be longer than 6 questions. But yeah I feel like a lot of people my age wouldn’t even be able to get half of those correct.

got the bonus question wrong cause of misclick

Bond and bnus questions got me

I got 4/6 but i guessed

yeah those are the 2 I got wrong

When interest rises, bonds drop in price because of lower ROI if prices were to stay the same. The market corrects

this kinda soft but I dont expect non financial people to know the bond question. If yall have any question I got you, Im all about this, I can tutor you all day

Here are the explanations if anyone got better explanations please let op and i know

Explanation to questions:
1. Interest rate means they are going to pay you for the percentage of money you have deposited. So after second year you would have 102 in your account, so its def going to be more then 102 after 5 years.

2. Inflation in this case means the percentage of everyday things that got more expensive over a time period (a 100$ in 1950s worth a lot more then today because of inflation). So if inflation is higher then interest rates then you would have less money then you've had.

3. This is a tricky one, I wouldn't expect everyday people to get. Here is an example, you get price of bond of 100 dollars, rates at 1 percent per year, so you are suppose to get 1 dollar per year. If rates raise to 2 percent, in order for you to get the same amount of 1 dollar, the price of the bond need to drop to 50 . This is not how it actually works because you get paid back the original money you put in but yall get the idea. The markets need to make the same bond equally attractive.

4. You have to pay back a sum of money in 15 or 30 years. There will be interest fee for each dollar you didn't pay back, so longer you wait to pay back the more interest. So even you pay more yearly with 15 years, you will pay less interest.

5. Here they weren't clear about what is a mutual fund, but think of a fund like the S&P500 ( a basket of companies) so instead of betting on one company you are betting on a bunch of them. So you are betting on the fact that overall companies are going to do well, instead of betting on one. So in that sense it is safer, as you wouldn't know what is the next tesla or google.

6. This is the most important concept of investing. Which is why you should invest early. Think about it for a min and refresh your 5th grade math.
year 1: 100*1.2 = 120
year 2: 120*1.2 = 144
year 3: 144*1.2 = 172.8
year 4: 172.8*1. = 207.36

It only took 4 years to double your money.
If you were only earning 7% per year ( avg return of S&P500) it would take around 10 years to double your money. That's insane.
Do you see the power of that, its called the power of compound interest, as Einstein said it " compound interest is the most powerful force in the universe"

Please add to @OP

I just dont think theyd get the bond question, other then that it should be simple if you spend 2 min to think about it

the bond question? dw about that imo bond prices so low that normal investors shouldnt buy them

got all 6 correct, if you got below 4/6 you should really watch a few econ/finance videos

i got 5/6 because i f***ed up the math on one question w/o a calculator

6/6