How Smart Are You?

Many people are familiar with the game show on Fox called “Are you Smarter than a 5th Grader” hosted by comedian Jeff Foxworthy.  If you have not seen it, check it out sometime to see how you compare to the contestants.  I have to confess that the few times I have watched it, there are times that I am definitely not smarter than a 5th grader.  Some of the questions are tough!  Questions that were equally as tough was the 2008 survey of personal financial literacy among college students.  1,030 full-time college students were given a 31 question survey to see how well they comprehended some of the basics of personal finance.  How did they score?  The mean score was 62.2%.  I came across this survey and what astonished me the most was that of the questions that were answered wrong, they were answered that way among many of the college students.  Here’s 6 of the 31 questions of the survey. The answers are provided at the end so you’re on the honor system here.   Let’s see how you do……

1. Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years?

A. Older, working couples saving for retirement
B. Older people living on fixed retirement income
C. Young couples with no children who both work
D. Young working couples with children

2. Which of the following types of investments would best protect the purchasing power of a family savings in the event of a sudden increase in inflation?

A. A 10-year bond used by corporation
B. A certificate of deposit at a bank
C. A 25-year corporate bond
D. A house financed with a fixed rate mortgage

3. Retirement income paid by a company is called:

A. 401(k)
B. Pension
C. Rent and profit
D. Social Security

4. Sarah and Joshua just had a baby. They received money as baby gifts and want to put it away for the baby’s education. Which of the following tends to have the highest growth over periods of time, as long as 18 years?

A. A checking account
B. Stocks
C. A U.S. government savings bond
D. Savings account

5. Chelsea works her way through college, earning $15,000 per year. After graduation, her first job pays $30,000. The total dollar amount Chelsea will have to pay in federal income taxes in her new job will:

A. Double, at least from when she was in college
B. Go up a little from when she was in college
C. Stay the same as when she was in college
D. Be lower than when she was in college

6. If you have a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?

A. Earning from savings accounts, interest may not e taxed
B. Income tax may be charged on the interest if your income is high enough
C. Sales tax may be charged on the interest that you earn
D. You cannot earn interest until you pass your 18th birthday

Check Your Answers Below.

The letter is bold denotes the correct number.  The numbers are the percentages of the answers that were chosen.

1.  A) 8.2 B) 5.7 C) 50.1 D) 36.0

2.  A) 12 B) 37  C)11.1 D) 39.9

3. A) 46.4 B) 44.2 C) 1.3 D) 8.1

4. A) 2.0 B) 19.2 C) 61.9 D) 17.0

5. A) 47.1 B) 43.2  C) 7.0 D) 2.7

6.  A) 47.1 B) 39.1 C) 10.4 D) 3.4

Securities offered through LPL Financial, Member FINRA/SIPC

• Stock investing involves risk including loss of principal.
• Bonds are subject to market and interest rate risk if sold prior to maturity.  Bond values will decline as interest rate rise and are subject to availability and change in price.