2006 Jumpstart Questionaire Part 3 at Catch a Gideon

November 2nd, 2006 by digerati

This survey establishes that there are serious misconceptions about various financial topics. The questions are not difficult, bu the average score on the survey was only 52.4%! Take a look at the questions and see how many you know. Starred answers are the correct ones. I’ve added some notes after each question.

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

8.7% a) Young couples with no children who both work.

33.9% b) Young working couples with children.

13.3% c) Older, working couples saving for retirement.

*44.1% d) Older people living on fixed retirement income. They have no income potential, so whatever money they get is worth less.

12. Which of the following is true about sales taxes?

5.9% a) You don’t have to pay the tax if your income is very low.

*49.6% b) It makes things more expensive for you to buy.

29.5% c) The national sales tax percentage rate is 6%. Sales tax is levied by the states.

15% d) The federal government will deduct it from your paycheck. Not from a paychech, although you’re supposed to report sales tax on your income tax from online purchases.

13. Lindsay has saved $12,000 for her college expenses by working part-time. Her plan is to start college next year and she needs all of the money she saved. Which of the following is the safest place for her college money?

10.4% a) Corporate bonds

*80.4% b) A bank savings account While not 100% “safe” it is the safest place for money. There is no risk of losing it, and the money is government insured. Also, it’s not in a closet where someone could take it, or she might spend it.

5.3% c) Locked in her closet at home

3.9% d) Stocks

14. Which of the following types of investment would best protect the purchasing power of a family’s savings in the event of a sudden increase in inflation?

22.0% a) A twenty-five year corporate bond

*44.6% b) A house financed with a fixed-rate mortgage

17.3% c) A 10-year bond issued by a corporation

16.1% d) A certificate of deposit at a bank

All but B are things that pay you interest over time. That interest is fixed at what was agreed when you bought the bond or CD. Inflation makes those returns relatively less. The mortgage is something you are paying. When inflation goes up your creditors get relatively less, and you (the debtor) pay relatively less.

15. Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?

6.6% a) When some clothes you like go on sale. Ha!

31.5% b) When the interest on the loan is greater than the interest you get on

your savings.

*57.8% c) When you need to buy a car to get a much better paying job. This is the best answer, though not necessarily adaquete.

4.2% d) When you really need a week vacation.