How Would You Do On The Advanced Financial Education Test
The National Financial Educators Council developed an Advanced Financial Education test to evaluate financial literacy including questions on loan payments, inflation, risk-based pricing, FICO scoring, loan qualification, and investments. It was designed for high school students (as well as adults), but isn’t it tempting to know how you’ll do? We all know that financial education isn’t always taught in high school. All of us older folk had to learn from other sources or on our own. Let’s make 2024 the year we level up our financial knowledge!
Here is the 8- question test. Answers are at the bottom of the page.
1. Loan payments are based on:
A. APR
B. Interest Rate
C. Length of the Loan
D. B & C only
E. All of the above
2. If the current inflation rate is at 3%…
A. Investments in securities (stock market, mutual funds) adjust to market conditions by 3%.
B. 401k plans adjust to market conditions by 3%
C. My net income needs to increase by 3% to maintain my current lifestyle.
D. My savings need to increase by 3% to maintain my current lifestyle.
3. If you are unable to pay off the entire balance you owe in credit card debt, the best way to pay off the balance is to _____.
A. Pay more than the minimum monthly payments on all your credit cards.
B. Pay off the card with the lowest balance first.
C. Pay the maximum your budget allows on the card with the highest interest rate.
D. Pay the maximum payment on the card with the highest balance.
4. If inflation is at 2%, in what option below are you most likely to lose 2% purchasing power?
A. Stock market
B. Real estate
C. Cash
D. Commodities
E. Bonds
F. All of the above
5. What is risk-based pricing?
A. The cost of the deductible and premium added together.
B. The amount of money the insurance company pays toward your claim and the adjustment to your interest rate made by your lender.
C. Basing your insurance or loan pricing on the risk you pose to the company.
D. All of the above
6. Which of the following categories influences your FICO score?
A. Outstanding debt
B. Payment history
C. Types of credit used
D. A & B only
E. All of the above
7. What four main areas do lenders review to qualify a loan applicant?
A. Credit, cash, education, and income.
B. Equity, credit history, assets, and debt-to-income ratio.
C. Equity, cash on hand, asset report scoring, and debt-to-income ratio
D. Liquidity, credit history, asset report scoring, and debt-to-income ratio
8. The biggest risk of owning long-term bonds for capital preservation is:
A. Falling interest rates
B. Rising interest rates
C. Falling dollar
D. Rising dollar
E. Real estate valuation
The National Financial Educators Council had 3 core objectives in mind: providing resources for financial educators, offering tools for people interested in improving their financial knowledge, and giving the media up-to-date information about the current state of financial literacy. You can take this and other tests at www.financialeducatorscouncil.org.
Answers:
1: D ; 2: C ; 3: C ; 4: C ; 5: C ; 6: E ; 7: B ; 8: B
