Financial Literacy Quiz-Answers

Here are the answers to the Quiz

Answer: A bit more than $13

Since inflation is 3% per year, but inflation compounds, then total inflation will be combined for more than 30% over the next ten years. In fact, inflation would be a total of 34%, so the ticket would cost $13.40.

financial literacy quiz

Answer: A 9% gain

While exact numbers differ, depending on how you count investment fees, it is safe to assume a 9% return over any 30 year period in the past. While past performance does not always indicate future results, it is a commonly accepted practice to assume future returns will mirror historic returns.

financial literacy quiz

Answer: $600

Since you are contributing $100 each month and the company matches 50% that would be $100 X 0.50 X 12 = $50 X 12 = $600

financial literacy quiz

Answer: About 14 years

In fact, it would take 13 years and 11 months. That is because the minimum payment continues to decrease as the amount you owe gets smaller. Unlike loans where the payment stays the same, credit cards payment is based on how much you owe, which leads to longer term debt that costs lots of money  in interest expense.

financial literacy quiz

Answer: The $2,000 tax credit

A tax credit reduces your tax liability by the amount of the credit itself, so $2,000 in this case. A deduction only reduces it based on your marginal tax rate so 25% X $2,000 = $500.

financial literacy quiz

Answer: Credit

Unlike debt, which is money you actually owe, credit is the amount you have available to borrow – but have not yet actually borrowed it.

financial literacy quiz

Answer: It will not affect your credit score

Pressing the debit key means you will use your PIN and may be able to get cash back as well. Pressing the credit key simply means you may have to sign for the purchase but cannot get cash back. Either way, the money comes out of your account immediately. The difference is really what takes place behind the scenes between the merchant and the credit card company.

financial literacy quiz

Answer: $1,600

Cutting the time to pay off your mortgage in half does not require double the payment! In fact, your monthly payment would be $1,621. Amazing what a few hundred extra dollars can do to your mortgage!

financial literacy quiz

Answer: Renting a car

When you lease, you are renting a car for about 2 or 3 years. You are limited to a specific number of miles and must return the car in good condition. It is the most expensive way to own a new car if you do it every few years, unless you are going to buy a new car every three years anyway… which is another conversation.

financial literacy quiz

Answer: All of the car loan applications will be treated as a single inquiry on your report and will lower your score a small amount

While each inquiry shows up on your credit report, the credit scoring agency understands that people shop around for certain loans, such as cars and mortgages. So they count all of your credit inquiries within a short period of time as a single inquiry.

financial literacy quiz

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Bill Pratt

Bill is an Assistant Professor of Business at Piedmont Virginia Community College. He speaks on topics related to personal finance on college campuses across the country and is the author of multiple books on personal finance. He left the financial industry to focus on helping people become personally and financially successful. He lives in Charlottesville, VA with his wife and their three pets.