Consequences of Financial Ignorance for Less-Wealthy Individuals

FINRA Financial Literacy Quiz

An individual has saved $5,000 for a down payment on a car they plan to purchase in 12 months. They want to earn some return on this money but also need to ensure the full amount is available and has not lost value when they need it. Which of the following options best balances their goals of earning a return and preserving their initial capital?

Prioritizing Financial Goals

An individual deposits $1,000 into a savings account that earns a 2% annual interest rate. If the annual rate of inflation is 4% for that year, what is the approximate change in the purchasing power of the money in the account?

Evaluating Retirement Savings Strategies

A person has the following three debts and an extra $200 per month to pay towards them after making all minimum payments. To minimize the total amount of interest paid over time, which debt should they apply the extra $200 to first?

• Credit Card: $3,000 balance at 19% annual interest rate
• Student Loan: $10,000 balance at 6% annual interest rate
• Car Loan: $8,000 balance at 4% annual interest rate

An individual wants to build a long-term investment portfolio. Their primary goal is to minimize the risk of significant losses by ensuring their portfolio's performance is not tied to a single company or economic sector. Which of the following portfolios best achieves this goal?

Calculating an Incentive-Compatible Wage

Match each financial tool or account with its most appropriate primary use case.

A 28-year-old individual has a stable job, a six-month emergency fund, and no high-interest debt. They receive a one-time bonus of $10,000 and want to invest it for retirement, which is approximately 35 years away. They are willing to accept short-term market volatility for the potential of higher long-term growth. Which of the following investment choices best aligns with their situation and goals?

The Power of Compounding