Money IQ Quiz
How much do you know about the basics of managing your finances? This Money IQ Quiz will help gauge how familiar you are with some important concepts and terms that everyone should know. Answer each question to the best of your ability and see where you rank in terms of financial knowledge.
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1. The largest single factor that determines a credit score is:
A. The length of your credit history.
B. The amount of debt you owe.
C. Whether you pay your bills on time.
D. Your age
2. In real estate terminology, what is a “short sale”?
A. A short-term escrow.
B. Settling a real estate debt with a bank for less than is owed without going into foreclosure.
C. When the sales price of a property is less than the appraised value of the home.
D. When the lowest offer on a property for sale is accepted.
3. All life insurance falls under two categories. What are they?
A. Term and Permanent.
B. Premium and Coverage.
C. Universal and Variable.
D. Premium and Permanent.
4. You have three credit cards carrying balances at different interest rates ranging from 10% to 20%. How should you pay off the cards?
A. Pay the minimum balance on all three cards until they are paid off.
B. Pay off the card with the highest interest rate first and pay the minimum on the remaining cards.
C. Take money from your retirement plan and pay off all your cards as soon as possible.
D. Use a loan consolidation company to put the balances of all your cards into one promissory note.
5. What is the difference between a “fixed rate” and an “adjustable rate” mortgage?
A. A “fixed rate” mortgage can never be sold to another bank or lender.
B. An “adjustable rate” mortgage comes with lender fees.
C. The interest rate on a “fixed rate” mortgage will never change for the life of the loan.
D. With an “adjustable rate” mortgage, you can choose to only pay the interest on the loan.
6. What is the difference between a “bull” and “bear” market?
A. A bull market is when people are buying stocks and investor confidence is high; a bear market is when people are selling or holding their stocks.
B. A bull market is when people are selling or holding stocks and investor confidence is low; a bear market is when people are buying.
C. A bull market describes a company’s growth during the “Running of the Bulls” season in Pamplona, Spain; a bear market describes a company’s lack of growth, with the name being derived from hibernating bears.
D. A bull market refers to a company going public; a bear market refers to an acquisition of a company.
7. What is a capital gain?
A. Your income if you work for the government.
B. Profit from the sale of an investment asset (such as real estate and stocks).
C. The term used when Congress raises taxes to increase revenue.
D. The percentage of your income tax that is not subject to taxes (such as a gift).
8. What is the purpose of an IRA?
A. To provide a steady stream of income throughout retirement.
B. To put aside funds for qualified college education
C. To provide income in the case of job loss or unemployment.
D. To fund an insurance policy.
9. What is a mutual fund?
A. A professionally managed investment that pools money from many investors to purchase securities (such as stocks).
B. A tool for fundraising used by qualified nonprofits.
C. An investment in municipal bonds.
D. A limited partnership of investors that uses high risk methods.
10. What is an annuity?
A. The amount of compounded annual interest.
B. Another term for the Annual Percentage Rate (APR).
C. An insurance product that pays out a stream of income and can be used as part of a retirement strategy.
D. A bank savings vehicle that is held for a specified period of time at a fixed interest rate.
11. What is the Rule of 72?
A. A calculation used by financial institutions to determine your credit worthiness.
B. A rough estimate used by lenders to gauge the maximum mortgage payment on your home.
C. A term used by financial advisors to estimate income during retirement.
D. A quick, general calculation on how long it will take an investment to double.
12. What is a living trust?
A. Home health insurance that provides income protection in the event of long-term disability.
B. Any professionally managed investment vehicle.
C. A contract for a fixed sum of money to be paid regularly to a person, following retirement.
D. An arrangement where one party holds legal title to property for another party.
13. What is a 401(k)?
A. A federal tax form used when reporting business income.
B. A special tax exemption awarded to small business owners.
C. An employer-sponsored retirement plan that allows an employee to invest a portion of their paycheck before taxes are taken out.
D. A requirement by the SEC (Securities Exchange Commission) that requires all corporations to annually disclose their profits and losses.
14. If you are employed, who pays the Social Security tax taken out of your paycheck?
A. The government.
B. You as the employee.
C. Your employer.
D. Both the employee and the employer.
15. When starting a new job, what is the purpose of the W4 form?
A. It ensures that your employer has your legal name on file.
B. It tells the employer how much federal income tax should be withheld from each paycheck.
C. It tells the employer whether you want Social Security taxes withheld.
D. It tells the employer whether you will be withholding state taxes or not.
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