Take the test:
- Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow? (A) More than $102. (B) Exactly $102. (C) Less than $102.
- Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account? (A) More than today. (B) Exactly the same. (C) Less than today.
- Please tell me whether this statement is true or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.
The test isn’t new, designed by a group of financial gurus about 10 years ago to study whether various populations “have the fundamental knowledge of finance needed to function as effective economic decision makers.”
- Only 50% of Americans aged 50 and older answered the first two questions correctly.
- 33% answered all three questions correctly.
- Among the broader American population the results were generally similar.
- Better-educated folks perform better. Among Americans with college degrees, 55.7% didn’t answer all three questions correctly. 81% of those with high school diplomas didn't answer all 3 questions correctly.
So, here’s the answers:
Perhaps Jonathan Gruber was correct.
Let the discussion begin...
To read the Money magazine article, click on the following link: