The Bad Money Advice Financial Literacy Quiz

This is, as you undoubtedly know, Financial Literacy Month. (It is also, apparently, National Anxiety Month and International Guitar Month.) So to celebrate, I have prepared the following personal finance literacy quiz. And who doesn’t like quizzes?

I expect this to be relatively hard for most folks, although every question involves issues that an ordinary person might encounter in their financial lives.

I’m a little uncertain about the technology here, so if there are bugs, I apologize. Also, I assume that it will not work with RSS readers. Sorry.

The Financial Literacy Quiz

Musings, The Big Picture | Frank Curmudgeon | April 17, 2009 12:00 pm

112 Comments

By ObliviousInvestor, April 17, 2009 @ 12:58 pm

Great quiz! I got 17/20

I missed:
The one about points–not surprising, having not bought a house yet,
The 2nd-to-last one (about Monica retiring to Florida), and
The one about FDIC insurance. (No good reason here, just temporary brain failure.)
By Baker @ ManVsDebt, April 17, 2009 @ 1:21 pm

To which loan should Henry apply the $2500, assuming he wishes to maximize his net worth?

* All these options have no net effect on his net worth.

As of April 2009, FDIC insurance on bank deposits covers:

Deposits in checking and savings accounts up to $250,000, but not CDs
Deposits in checking and savings accounts up to $250,000, but not CDs

Options one and two are both the same!

Frank, really enjoyed this quiz… Nice job
By Matthew S, April 17, 2009 @ 1:50 pm

I believe that the law still says you are legally liable for $50 of fraudulent charges if your credit card is used to make unauthorized charges. However, credit card policy now states they won’t hold you liable. So, you are still liable for it, they are just forgiving that $50.
By SJ, April 17, 2009 @ 2:14 pm

HAHAHA i bombed it =)

I blame the fact I don’t care about certain things (mortgages,estate)
But still terrible score =)

I also thought you had to report a CC stolen to be protected… cool sutff =)

Nice to see how much more I have to learn!
By Frank Curmudgeon, April 17, 2009 @ 2:45 pm

Baker: I meant long-term net worth. I will edit the question for clarity. And fix the answers for the FDIC question. Thanks.
Matthew S: If Visa tells me I am not liable for anything, then I think they are legally bound by that promise and I am therefore not legally liable.
SJ: I suppose you do have to report a CC stolen at some point. I wonder what would happen if you waited, say, two or three years….
By Steve, April 17, 2009 @ 3:45 pm

I chose one of the duplicate options for the FDIC question, and the total was correct but the individual question showed me as answering correctly (when I obviously did not.) I was thrown off by the mispelling of “baring.” Thanks for posting a quiz which was at least a little challenging.
By ryan, April 17, 2009 @ 4:10 pm

I shouldn’t have gotten the first one wrong about house down payment savings–in reality, we did money market and CD’s for our down payment savings, but I was thinking that answer was too easy.

I didn’t know how to calculate the benefits for paying points.

I had no idea that’s what IRA stood for.

I didn’t realize margin interest was tax deductible. Is this pretty common for [affluent] people to do?

I didn’t know a broker would finance ETF purchases, but I suppose I shouldn’t be surprised.

When reading the last question, I glossed over the word “paper” and guessed “Grant.”

Anyway, as a side note, the question about Geraldine’s tax free home appreciation is fine, but the answer’s explanation states that $500k is tax exempt. Isn’t that only for couples? If it’s only Geraldine, I think that would just be $250k.
By Four Pillars, April 17, 2009 @ 4:13 pm

I got 15/20. Boo for making me think on a Friday afternoon!

I can’t believe the IRA one…
By Frank Curmudgeon, April 17, 2009 @ 5:56 pm

Ryan: The points thing in the explanation is just a rough approximation you can do in your head. A better (but still not air-tight) way is described in my Bloggers and Mortgage Interest post.

Margin interest is tax deductible, as is interest on any loan you take out to finance an investment. I’ve no idea how common it is. Financing ETF purchases is, of course, an example of using margin.

Good catch on Geraldine’s tax exemption. I will edit the explanation accordingly.
By Mark Wolfinger, April 17, 2009 @ 10:16 pm

Why have a quiz with incorrect answers?

The penultimate question. The correct answer is to finance 100% of the house. If property values decline, she can do the unethical, but financially correct move, and walk away from the house. That provides zero exposure. Cannot have less than that.
By ryan, April 17, 2009 @ 11:11 pm

Here’s an appropriate question:

The interest due on your mortgage each month is determined by what two variables?

a. remaining principle and interest rate
b. interest rate and amortization schedule
c. interest rate and loan term
d. number of years the loan has been serviced and loan term

Obviously “A” but I find people get so wrapped up in trying to understand this, 15 year vs. 30 year; how much will I save with a 15 year? Or they say “with a 30 year you’re paying so little principle at the beginning.” Very few people, writers included, seem to really grasp what prepayment actually does for them; they’ll know they’ll pay it off early, but they don’t really know why. And most people have no idea that a 15 year and a 30 year at the same rate can both be paid off in 15 years for the exact same amount of money each month.
By TJR, April 17, 2009 @ 11:48 pm

Here in Germany, most credit card agreements require you to pay for misuse before you reported it stolen, capped at 100EUR, but not for abuse after that. And you have to report it stolen both to the bank and the police as soon as you reasonably can, else you lose this protection entirely.

Side note: I got all of the US tax questions wrong. Wonder how come …
By DR, April 18, 2009 @ 6:41 am

Great quiz! The question about Fred’s Roth IRA and a taxable account is an interesting one. While the traditional view is to put bonds in the retirement account because they throw off taxable income each year, I’m not sure that’s the best option here. Since the Roth is tax free, and it is a reasonable assumption that the stock fund will, over time, grow much larger than Treasury Bonds, by putting stocks in the Roth, you shield more assets from the tax man in the long run.
By Frank Curmudgeon, April 18, 2009 @ 8:37 am

Mark: As I was writing that question the walk-away argument occurred to me, but I decided to let it be. Homeowners don’t have a right to walk away. If you borrow money on a mortgage you owe it, not the house, and a bank can sue you for it. As a practical matter, they rarely do, because the homeowner is generally broke. But in this case Monica apparently has the cash. Still, you have my permission to increase your score by a point.

TJR: Sorry to be so US-centric. So much of the hard parts of personal finance have to do with our tax laws and other regulations that I’m surprised anybody from Canada ever reads this, never mind Germany.

DR: Taken to extremes, I think you have a point, e.g if the stock side grew to twice the size of the bonds. I guess I was implicitly assuming that Fred would from time to time rebalance, i.e. that as the stocks outpaced the bonds he would sell some and buy bonds to keep at 50/50. Indeed, as he gets older he might want to skew more in favor of bonds anyway.
By the weakonomist, April 20, 2009 @ 9:55 pm

Frank, you got me with the dollar bills. I thought FDR was on the $100k, it’s Wilson instead. Good quiz. Of note, I keep a $2 bill in my wallet so was able to cheat there.
By Roger, April 28, 2009 @ 8:13 pm

Dang, I ended up with a 13 out of 20. Some stupid mistakes, some questions I didn’t read carefully enough, and some things I just didn’t know (federal tax deductions, for example). Oh well, at least I learned some new information.
By maxwellthedog, May 1, 2009 @ 2:49 pm

Frank– nice quiz, though i have to quibble with one point. When you talk about minimizing her “exposure” in the question about Florida real estate, there is another way to interpret it. When i read the question, i immediately thoguht of exposure as “precentage of net worth allocated to this asset”. If you think of someone’s assets and liabilities as a balance sheet, then borrowing as much against the house will reduce her exposure. For example, if she has $1M and decides to pay cash, then she is 25% exposed to FL real estate. But if she mortgages 100% and keeps her $1M in other investments, then she is only 20% exposed to real estate. Of course, she is also levered.

If she loses money on the house, she loses the same dollar amount either way. But if she took on the mortgage and actually earned a positive return with the rest of her portfolio (net of carry cost on the mortgage), then she will come out ahead.

I know it is a minor point, but when i hear the word “exposure” i think asset allocation. And economically, levering up across uncorrelated assets can help to reduce risk.
By Frank Curmudgeon, May 1, 2009 @ 4:34 pm

Not to get tied up with semantics, I think it makes more sense to think of risk exposure for a person in terms of dollars at risk rather than in terms of a percentage of a (possibly levered) portfolio. For example, if a person owns a house worth $1M and has no other assets or debts, and if they borrow $500,000 and put that money in the bank, I don’t think that they have reduced the risk that they are taking in any meaningful sense, although the house is now only 66% of their less risky asset portfolio.
By kurt, May 11, 2009 @ 11:01 am

“Interest paid on a loan that finances a stock purchase (margin interest)”

I was unaware (and missed this one, picked dry cleaning even though I suspected that was wrong too) this is tax deductible. A quick search on the web explains it, but I can’t figure out what the intent of that tax law is. Mortgage interest, student loan interest, well that’s pretty obvious. Are the Feds trying to tell us that we should go out and buy stocks on margin? Or is there something obvious I’m not considering?
By Frank Curmudgeon, May 11, 2009 @ 2:21 pm

The appealling answer is that margin interest is akin to a business cost. In general, expenses you incur to make money are deductible against that income.

The cynical answer (which always works better for me) requires a bit of history. In the good old days, all interest was deductible. When they reformed the tax code in the 1980′s they wanted to do away with that but realized that they had to make two exceptions: the mortgage interest deduction, because if they nixed it the housing market would collapse overnight, and the margin interest deduction, because the same thing would have happened to the stock market.
By Pnrurs, May 10, 2023 @ 8:45 pm

oral cialis 10mg buy tadalafil 20mg pill fda approved over the counter ed pills
By Qzbqav, May 19, 2023 @ 6:01 pm

buy accutane cheap purchase isotretinoin for sale buy azithromycin 500mg
By Eaiyjr, May 21, 2023 @ 7:50 am

order azithromycin pill omnacortil 20mg pill neurontin pill
By Gyvjvp, May 23, 2023 @ 2:51 am

furosemide 40mg tablet ventolin 4mg ca ventolin 2mg cost
By Owathn, May 24, 2023 @ 9:19 pm

buy vardenafil 20mg generic buy plaquenil tablets cost plaquenil 200mg
By Ngzdew, June 14, 2023 @ 8:00 pm

order generic ampicillin 250mg purchase flagyl order metronidazole 400mg pills
By Flubsk, June 15, 2023 @ 2:19 am

purchase rosuvastatin generic order rosuvastatin 20mg generic motilium 10mg generic
By Sbvxfe, June 16, 2023 @ 3:46 pm

buy generic tetracycline 250mg order lioresal generic ozobax sale
By Pecfsh, June 16, 2023 @ 3:51 pm

buy trimethoprim cheap cephalexin 500mg without prescription cheap clindamycin
By Qzhgcl, June 18, 2023 @ 5:57 am

buy generic toradol buy inderal 20mg online cheap purchase inderal pills
By Xxgvtj, June 18, 2023 @ 11:47 am

purchase erythromycin generic buy erythromycin 500mg generic tamoxifen 20mg tablet
By Gfybzb, June 19, 2023 @ 8:26 pm

plavix 75mg pills clopidogrel cost medex price
By Xgdtpi, June 20, 2023 @ 8:50 am

rhinocort drug buy bimatoprost no prescription buy careprost generic
By Cmqzvr, June 21, 2023 @ 12:48 pm

buy reglan 20mg online cheap buy losartan online buy generic nexium for sale
By Lqclkf, June 22, 2023 @ 5:47 am

buy methocarbamol no prescription methocarbamol 500mg ca sildenafil for sale online
By Перекладные фокусы, June 22, 2023 @ 12:10 pm

Hi, everything is going sound here and ofcourse every one is sharing data, that’s really fine, keep up writing.
By Gcpnue, June 23, 2023 @ 4:03 am

buy topiramate tablets purchase imitrex order levofloxacin 250mg
By Ojyfkb, June 24, 2023 @ 2:23 am

order aurogra generic order sildenafil 100mg generic estradiol over the counter
By Zyerlj, June 24, 2023 @ 6:13 pm

buy avodart 0.5mg online cheap mobic 15mg over the counter buy mobic cheap
By Lqfkkg, June 26, 2023 @ 12:33 am

order lamotrigine 50mg online cheap lamictal 200mg without prescription prazosin 1mg usa
By Djozrl, June 26, 2023 @ 9:32 am

order celebrex generic celecoxib 100mg for sale zofran 4mg canada
By vammebel.ru, June 26, 2023 @ 12:25 pm

Hi there to every one, it’s really a pleasant for me to visit this web site, it contains priceless Information.
By spravki-kupit.ru, June 26, 2023 @ 5:33 pm

купить справку в москве
By диплом о высшем образовании, June 27, 2023 @ 1:44 pm

It’s really a nice and helpful piece of information. I’m satisfied that you shared this helpful info with us. Please stay us informed like this. Thanks for sharing.
By Jzfkqp, June 28, 2023 @ 12:16 am

aldactone online order aldactone 25mg uk buy valacyclovir 500mg generic
By Lschgo, June 28, 2023 @ 1:31 am

retin gel canada avanafil 100mg usa order avanafil 200mg generic
By Fpoxcx, June 29, 2023 @ 2:08 pm

proscar 5mg cost buy proscar 5mg pills brand viagra 50mg
By накрутка лайков в яппи, July 30, 2023 @ 7:18 am

Having read this I thought it was extremely informative. I appreciate you finding the time and effort to put this information together. I once again find myself spending way too much time both reading and commenting. But so what, it was still worth it!
By Bpyufs, July 31, 2023 @ 1:08 am

buy diovan 80mg generic order clozaril 50mg online order combivent online cheap
By Ouihpg, July 31, 2023 @ 3:41 pm

trileptal cost order uroxatral 10mg for sale buy urso 150mg
By smartremstroy.ru, July 31, 2023 @ 8:38 pm

Hurrah! After all I got a website from where I know how to in fact get helpful information regarding my study and knowledge.
By daachnik.ru, August 1, 2023 @ 7:20 pm

Hi there, constantly i used to check webpage posts here early in the break of day, since i like to learn more and more.
By delaremontnika.ru, August 2, 2023 @ 11:21 am

My partner and I absolutely love your blog and find a lot of your post’s to be exactly I’m looking for. Does one offer guest writers to write content for you? I wouldn’t mind producing a post or elaborating on a lot of the subjects you write concerning here. Again, awesome web site!
By Mpyhqw, August 2, 2023 @ 2:15 pm

buy decadron pills for sale starlix 120mg generic starlix 120 mg sale
By химчистка дивана на дому в жодино, September 2, 2023 @ 7:31 am

If you want to take much from this article then you have to apply such strategies to your won website.
By химчистка мягкой мебели жодино, September 2, 2023 @ 8:27 am

I like the valuable information you provide in your articles. I will bookmark your weblog and check again here frequently. I am quite certain I will learn lots of new stuff right here! Good luck for the next!
By химчистка дивана на дому в смолевичах, September 2, 2023 @ 10:15 am

Article writing is also a fun, if you be acquainted with after that you can write otherwise it is complex to write.
By Rumckn, September 3, 2023 @ 12:53 am

buy monograph generic buy mebeverine generic pletal 100 mg uk
By Mvpvmk, September 4, 2023 @ 6:21 pm

ferrous sulfate 100mg uk buy generic ascorbic acid over the counter sotalol 40 mg cost
By agrosadovnik.ru, September 6, 2023 @ 12:36 pm

It is perfect time to make some plans for the future and it is time to be happy. I have read this post and if I could I wish to suggest you few interesting things or advice. Perhaps you could write next articles referring to this article. I wish to read more things about it!
By sadovoe-tut.ru, September 6, 2023 @ 12:47 pm

Hi mates, nice article and pleasant arguments commented here, I am in fact enjoying by these.
By cash advance near me, October 7, 2023 @ 11:51 am

Its like you read my mind! You seem to know so much approximately this, like you wrote the e-book in it or something. I feel that you could do with some % to force the message house a bit, however other than that, this is fantastic blog. A great read. I’ll definitely be back.
By cash advance near me, October 7, 2023 @ 2:35 pm

you are in reality a good webmaster. The web site loading velocity is incredible. It kind of feels that you are doing any unique trick. Moreover, The contents are masterpiece. you have performed a magnificent task in this matter!
By Ucupyv, October 7, 2023 @ 6:20 pm

order dilantin 100 mg for sale where to buy cyclobenzaprine without a prescription oxybutynin 5mg ca
By online television, October 8, 2023 @ 7:19 pm

Nice post. I used to be checking continuously this blog and I am inspired! Very useful information specially the final part I care for such info a lot. I used to be seeking this particular info for a long timelong time. Thank you and good luck.
By Ikypqc, October 8, 2023 @ 8:12 pm

buy loratadine pills for sale buy generic ramipril online dapoxetine pills
By online television, October 9, 2023 @ 9:55 am

An impressive share! I have just forwarded this onto a coworker who was doing a little research on this. And he in fact bought me lunch simply because I found it for him… lol. So let me reword this…. Thank YOU for the meal!! But yeah, thanx for spending time to discuss this issue here on your site.
By Htjixb, October 9, 2023 @ 7:55 pm

lioresal medication how to buy ketorolac order toradol 10mg sale
By online television, October 10, 2023 @ 12:51 pm

An impressive share! I have just forwarded this onto a friend who was doing a little research on this. And he in fact bought me breakfast simply because I found it for him… lol. So let me reword this…. Thank YOU for the meal!! But yeah, thanx for spending the time to discuss this issue here on your web page.
By Ijqjua, October 11, 2023 @ 12:50 pm

baclofen 25mg uk elavil 10mg drug buy cheap generic toradol
By online television, October 11, 2023 @ 3:22 pm

Awesome! Its actually awesome article, I have got much clear idea regarding from this post.
By Cnrqtm, October 11, 2023 @ 3:23 pm

buy glimepiride 1mg pills etoricoxib 60mg ca order arcoxia sale
By Lcmidf, October 13, 2023 @ 9:49 pm

fosamax online order buy fosamax 70mg pills nitrofurantoin buy online
By гостиничные чеки с подтверждением москва, October 15, 2023 @ 10:56 am

Thank you for some other informative blog. Where else may I am getting that kind of info written in such a perfect method? I have a undertaking that I am simply now operating on, and I have been at the glance out for such information.
By купить чек на гостиницу в москве, October 15, 2023 @ 11:25 pm

Great post but I was wondering if you could write a litte more on this topic? I’d be very grateful if you could elaborate a little bit more. Cheers!
By Csrdhk, October 16, 2023 @ 3:07 am

inderal 20mg uk buy plavix 150mg for sale buy clopidogrel tablets
By документы на гостиницу в москве, October 16, 2023 @ 8:46 am

Normally I do not read article on blogs, however I wish to say that this write-up very pressured me to try and do so! Your writing taste has been amazed me. Thank you, quite great article.
By сделать чеки на гостиницу, October 16, 2023 @ 8:58 pm

Oh my goodness! Amazing article dude! Many thanks, However I am encountering issues with your RSS. I don’t know why I am unable to subscribe to it. Is there anybody else getting identical RSS problems? Anyone who knows the solution will you kindly respond? Thanx!!
By best canadian pharmacies, October 17, 2023 @ 4:07 am

most trusted canadian online pharmacy
By online television, October 17, 2023 @ 1:42 pm

Excellent web site you have here.. It’s hard to find good quality writing like yours these days. I truly appreciate people like you! Take care!!
By online television, October 18, 2023 @ 4:14 am

I will right away grasp your rss as I can not find your email subscription link or newsletter service. Do you have any? Please allow me recognize so that I may just subscribe. Thanks.
By Fjzlnp, October 18, 2023 @ 7:57 am

buy nortriptyline pills pamelor online order buy panadol 500 mg sale
By canadian pharmacy antibiotics, October 18, 2023 @ 10:21 am

canada pharmaceutical online ordering
By Mhzqaa, October 19, 2023 @ 4:35 am

buy xenical 120mg pills order diltiazem 180mg buy diltiazem 180mg pill
By online television, October 19, 2023 @ 12:25 pm

Hi there, I enjoy reading all of your article. I like to write a little comment to support you.
By Онлайн казино, October 20, 2023 @ 4:26 am

Nice blog here! Also your website loads up fast! What host are you using? Can I get your affiliate link to your host? I wish my site loaded up as fast as yours lol
By Онлайн казино, October 20, 2023 @ 3:23 pm

It’s going to be finish of mine day, except before finish I am reading this enormous article to increase my knowledge.
By Weiofg, October 20, 2023 @ 7:12 pm

warfarin 5mg oral paxil 10mg us buy generic reglan
By стяжка пола москва, October 22, 2023 @ 5:54 pm

Ищете профессионалов для устройства стяжки пола в Москве? Обратитесь к нам на сайт styazhka-pola24.ru! Мы предлагаем услуги по залитию стяжки пола любой сложности и площади, а также гарантируем быстрое и качественное выполнение работ.
By Mzhhwd, October 22, 2023 @ 8:21 pm

astelin 10 ml sprayer buy zovirax without prescription order generic avalide
By стяжка пола, October 23, 2023 @ 6:20 am

Нужна стяжка пола в Москве, но вы не знаете, как выбрать подрядчика? Обратитесь к нам на сайт styazhka-pola24.ru! Мы предлагаем услуги по устройству стяжки пола любой площади и сложности, а также гарантируем доступные цены и высокое качество работ.
By snabzhenie-obektov.ru, October 24, 2023 @ 4:55 am

снабжение строительных объектов москва
By Moghff, October 24, 2023 @ 10:38 am

buy pepcid 40mg sale buy prograf no prescription buy prograf 1mg sale
By snabzhenie-obektov.ru, October 24, 2023 @ 6:01 pm

снабжение строительных объектов
By чеки гостиницы с подтверждением, October 25, 2023 @ 7:58 pm

Everything is very open with a very clear explanation of the issues. It was really informative. Your website is very useful. Thanks for sharing!
By купить чек на гостиницу в москве, October 26, 2023 @ 12:54 am

I?m not that much of a online reader to be honest but your blogs really nice, keep it up! I’ll go ahead and bookmark your site to come back later. All the best
By штукатурка механизированная, October 26, 2023 @ 5:26 am

Хотите получить идеально ровные стены без лишних затрат? Обратитесь к профессионалам на сайте mehanizirovannaya-shtukaturka-moscow.ru! Мы предоставляем услуги по машинной штукатурке стен по доступной стоимости, а также гарантируем устройство штукатурки по маякам стен.
By механизированная штукатурка, October 26, 2023 @ 10:59 pm

Ищете решение для ремонта? Механизированная штукатурка с mehanizirovannaya-shtukaturka-moscow.ru – это быстро, качественно и без пыли.
By glavdachnik.ru, October 27, 2023 @ 6:35 am

If you wish for to improve your knowledge only keep visiting this web site and be updated with the newest gossip posted here.
By Bravcf, October 27, 2023 @ 7:12 am

order nexium 40mg generic buy mirtazapine 30mg pill buy topiramate generic
By Sbqpmk, October 28, 2023 @ 1:19 am

cheap allopurinol 300mg how to buy zyloprim order crestor 20mg pills
By сделать чек на гостиницу, October 29, 2023 @ 3:32 am

This is my first time visit at here and i am in fact impressed to read all at alone place.
By Apawcr, October 29, 2023 @ 4:40 am

buy sumatriptan 50mg without prescription order avodart sale cheap avodart 0.5mg
By где можно заказать гостиничные чеки в москве, October 29, 2023 @ 3:38 pm

I’m really enjoying the design and layout of your site. It’s a very easy on the eyes which makes it much more enjoyable for me to come here and visit more often. Did you hire out a designer to create your theme? Great work!
By Ihqpqo, October 29, 2023 @ 4:57 pm

buspin online order buspar 10mg over the counter cordarone for sale
By medication, July 8, 2024 @ 6:49 am

cipro 500mg prices
By medication, July 10, 2024 @ 9:01 am

baclofen australia
By drug, July 20, 2024 @ 5:05 pm

where to buy vermox in usa
By drug, July 22, 2024 @ 8:39 pm

dexamethasone cost
By online, August 2, 2024 @ 3:12 pm

where can i get dexamethasone
By tablets, August 4, 2024 @ 6:41 pm

where to buy tamoxifen uk