One of the biggest problems Americans have is we believe we know more about money than we do. We are 70% overconfident about our money skills, and so we take risks we never should.

How many can you get right?

## Interest Rate Question

Suppose you had $100 in a savings account, and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

More than $102

Exactly $102

Less than $102

## Inflation Question

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

More than today

Exactly the same

Less than today

## Risk Diversification Question

Buying a single company’s stock usually provides a safer return than a stock mutual fund.

True

False

## Bond Pricing Question

If interest rates rise, what will typically happen to bond prices?

They will rise

They will fall

They will stay the same

There is no relationship between bond prices and the interest rate

## Compound Interest Rate Question

Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?

Less than 2 years

At least 2 years, but less than 5 years

At least 5 years, but less than 10 years

At least 10 years

## Mortgage Question

A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.

True

False

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