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Rich? Yes. Financially literate? Not so much
11-18-2015, 03:47 PM
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#1
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,349
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Rich? Yes. Financially literate? Not so much
Could the people you know pass this five question financial test?
Quote:
Only 57% of Americans notched a passing grade, compared with over 70% in Norway, Denmark and Sweden, and over 60% in Israel, Canada, the U.K., the Netherlands, Germany, Australia, Finland and New Zealand.
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- Suppose you have some money. Is it safer to put your money into one business or investment, or into multiple businesses or investments?
- Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy: Less than today, same as today, more than today.
- Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 plus 3%?
- Suppose you put money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank add more money the second year than the first year, or add the same amount of money both years?
- Suppose you had $100 in a savings account and the bank adds 10% per year. How much money would you have after five years if you did not remove any? More than $150, Exactly $150, or Less than $150
The U.S. May Be the World’s Richest Country, But It Ranks 14th in Financial Literacy - Real Time Economics - WSJ
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11-18-2015, 04:01 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,183
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__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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11-18-2015, 04:01 PM
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#3
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Dryer sheet aficionado
Join Date: Jan 2011
Posts: 31
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I think the answers to 2 of those questions could be answered by "It depends". The one about your income doubling...it assumes that you spend every dollar you earn, which is not exactly realistic.
And the one about paying back $105 vs. $100 @ 3%...that would depend on how long you have to repay, wouldn't it? If it's 2 years, then paying $105 is the better deal.
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11-18-2015, 04:03 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Oct 2014
Posts: 1,677
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Phew! I got them all correct. If I hadn't, I would be worried about my decision to ER.
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11-18-2015, 04:07 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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I agree that the quiz is flawed. And unrealistic. What kind of bank adds 15% or 10% to your account every year? Yeah, it's just numbers to test your math knowledge, but my answer would be that I'll have less because I'll probably look into the bank and realize it's way too risky and pull my money out.
Also, at the end it says:
Quote:
Answer three of four topics correctly, and you pass.
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Not sure how many "topics" there are, but there are 5 questions.
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11-18-2015, 04:14 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 4,373
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Also number 2 is dependent on tax rates.
Bad questions 1 and 2 since they are making assumptions.
__________________
The problem isn't artificial intelligence, it's natural stupidity.
You can't spend yourself to prosperity.
Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
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11-18-2015, 05:09 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Jan 2014
Posts: 1,770
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Quote:
Originally Posted by RunningBum
Also, at the end it says:
Not sure how many "topics" there are, but there are 5 questions.
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There were 4 topics and the last topic had 2 questions.
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11-18-2015, 05:21 PM
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#8
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Full time employment: Posting here.
Join Date: Apr 2015
Posts: 903
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Quote:
Originally Posted by RunningBum
What kind of bank adds 15% or 10% to your account every year?
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In fairness, there was a time when interest rates were 10-15%. Alas, so was inflation.
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11-18-2015, 06:13 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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5 for 5.... you guys must have had other questions. I think some are either reading more into the questions or looking for all the terminology to be in the terms they prefer.
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11-18-2015, 06:44 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Jun 2014
Posts: 1,069
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Quote:
Originally Posted by youbet
Some of the questions are lame and need clarification. You need to know what businesses or investments. The morons who wrote the question are probably trying to get to the concept of diversification being "safer" than concentration. But........ What is the single investment was a US Treasury Bond and the multiple investments were five flaky penny stocks? You can't calculate the answer without knowing the term of the loan and whether the 3% is an annual number. Is the 15% compounded or not? Is the 10% compounded or not?
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I think ceteris paribus is implied.
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11-18-2015, 06:47 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by bingybear
5 for 5.... you guys must have had other questions. I think some are either reading more into the questions or looking for all the terminology to be in the terms they prefer.
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I got 5 for 5 too, but I still think it's a very flawed quiz.
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11-18-2015, 06:50 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Oct 2011
Location: Philadelphia
Posts: 1,404
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This thread is really funny. The people who took the above survey know too little ... But the people on this board know too much!!
This thread reminds me of a really funny Big Bang episode where Sheldon goes to get a driver's license and is asked to take a test. When asked how many car lengths you should stay behind the car in front of you, he says it can't be answered because a car length isn't a standard unit of measure. There is a question on braking distance or something similar and he starts talking about co-efficients of friction.
I love this board. We're where Sheldon would hang out if he were into finance instead of physics :-)
__________________
Luck is when Preparation meets Opportunity.
FIRE'd 1/1/24
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11-18-2015, 07:03 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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Quote:
Originally Posted by RunningBum
I got 5 for 5 too, but I still think it's a very flawed quiz.
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Some of the questions could have been more clear. But to the "what banks would add 10 or 15% a year to ones account"? ... I would think a few did in the late 70's/early 80's, or at least close. Think of times back then with high inflation.
The question about which would you pay less $105 or $100 +3%. With no time given, one (at least me ) would assume the 3% would be on the life of the loan and it only implies a single payback.
The quiz is just basic concepts, not complex issues.
The one on diversification is the same. The assumption is that the person makes good investment choices.
Many people just over think the simple quizzes.
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11-18-2015, 08:21 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Syracuse
Posts: 3,502
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Horribly worded test. There's way to many like this in the media "We asked so many Americans these questions, look how stupid they are!" In reality the tests are incredibly flawed.
(5 of 5 though)
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__________________
“No, not rich. I am a poor man with money, which is not the same thing"
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11-18-2015, 08:51 PM
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#15
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Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,250
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In question 2 presumably your tax rate would go up so if we assume you spend every time you should afford less not the same.
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11-18-2015, 09:08 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2013
Posts: 11,078
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Quote:
Originally Posted by krotoole
This thread is really funny. The people who took the above survey know too little ... But the people on this board know too much!!
This thread reminds me of a really funny Big Bang episode where Sheldon goes to get a driver's license and is asked to take a test. When asked how many car lengths you should stay behind the car in front of you, he says it can't be answered because a car length isn't a standard unit of measure. There is a question on braking distance or something similar and he starts talking about co-efficients of friction.
I love this board. We're where Sheldon would hang out if he were into finance instead of physics :-)
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+1
The test is multiple guess geared toward folks with basic math skills! Bunch of highly educated folks are trying too hard. The test is as basic and flawed as it is.
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11-18-2015, 09:11 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by bingybear
Some of the questions could have been more clear. But to the "what banks would add 10 or 15% a year to ones account"? ... I would think a few did in the late 70's/early 80's, or at least close. Think of times back then with high inflation.
The question about which would you pay less $105 or $100 +3%. With no time given, one (at least me ) would assume the 3% would be on the life of the loan and it only implies a single payback.
The quiz is just basic concepts, not complex issues.
The one on diversification is the same. The assumption is that the person makes good investment choices.
Many people just over think the simple quizzes.
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Yeah, we're being a bit picky about some. I really disagree about the diversification one though. Just having a few things doesn't make it safer than having one thing without knowing what those things are. People really do make that mistake. If the article can criticize the financial literacy of the US, I can criticize their financial literacy when they have issues too.
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Rich? Yes. Financially literate? Not so much
11-18-2015, 09:23 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2009
Posts: 9,343
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Rich? Yes. Financially literate? Not so much
Quote:
Originally Posted by RunningBum
Yeah, we're being a bit picky about some. I really disagree about the diversification one though. Just having a few things doesn't make it safer than having one thing without knowing what those things are. People really do make that mistake. If the article can criticize the financial literacy of the US, I can criticize their financial literacy when they have issues too.
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I agree... With what I invest in I have over a third of my money in two companies preferred stock, with a dozen or so making up the rest. I really would have no problem with all of it in one of the two. But its too hard to squeeze the money in at the right price. But it is a lot easier doing what I do, knowing I am not even using the money in retirement.
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11-18-2015, 09:39 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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Quote:
Originally Posted by Letj
In question 2 presumably your tax rate would go up so if we assume you spend every time you should afford less not the same.
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When I saw your other post, I looked at the numbering and questions in youbet's post. I went back to the quiz and now understand your comment. Maybe they meant that your money doubled after taxes. The question did not did not mention taxes or other factors that would change the buying power.
I tried to just use the information given to guess what they were after.
krotoole put it well suggesting this is like the big bang theory. Normally I would be the one that this comparison is used for... at least in an engineering topic.
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11-18-2015, 09:57 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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Quote:
Originally Posted by MRG
+1
The test is multiple guess geared toward folks with basic math skills! Bunch of highly educated folks are trying too hard. The test is as basic and flawed as it is.
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