Have you learned the basics of finance and investing? Are you ready to dive deeper into the financial world? See just how much you know with this quick but comprehensive quiz.

Multiple-choice answers are at the bottom.

Questions

1: What is a stock

  1. A collection of a company’s shares (shares are small pieces of the company)
  2. The price of how much the entire company is worth
  3. A company

2: What is a credit score?

  1. How much money is left on your debit card
  2. The amount of debt you have on your credit card
  3. A score of how reliable and on-time you are for paying back loans

3: Is there a difference between a credit and debit card? If so, what?

  1. No, there is no difference; they mean the same thing.
  2. Yes, credit card costs money to get but a debit card is free
  3. Yes, a debit card takes money out of your checking account and a credit card allows you to buy items and pay them back later

4: What is a mutual fund?

  1. A savings account but with stocks and cash in it
  2. A fund that is shared between two people
  3. A fund that holds a collection of securities and is actively managed

5: What is an ETF or an Index Fund?

  1. 1: ETFs and Index Funds give better stock options than mutual funds but can cost more
  2. ETFs and mutual funds are made up of a collection of different securities, like mutual funds, but they are not actively managed
  3. ETFs and index funds all have a minimum of 500 different stocks, like the S&P 500.

6: What is a retirement account?

  1. An account that is only for people that have retired
  2. An account you open to save for retirement; it usually grows through compound interest
  3. An account that you save money in but can not use once you retire.

7: What is the lowest risk investment out of the following options:

  1. Savings accounts
  2. Bonds
  3. Stocks

8: What is the highest risk investment out of the following options:

  • Stocks
  • Mutual funds
  • CDs

9: Is there a difference between a savings account and a checking account? If so, what?

  1. Yes, a savings account is for saving your money while a checking account is for writing checks and paying others
  2. No, they mean the same thing
  3. Yes, checking accounts always have more money in them than savings accounts.

10: How is a CD different than a Savings Account?

  1. A CD is exactly the same as a savings account
  2. A CD does not let you take your money out for a set time but it pays higher interest
  3. A CD lets you save and grow your money tax-free but you can’t take it out for a set time

11: What are income taxes?

  1. Taxes you can only pay with your income
  2. Taxes on your income
  3. Taxes you pay if your income is over $100,000

12: Why are income taxes “progressive”?

  1. Because the more money you make, the higher tax percent you pay
  2. Because they grow every year
  3. Because they only tax people who make over $100,000

13: Do investments get taxed?

  1. Yes, investments are always taxed after you sell the investment
  2. Sometimes: investments are taxed after you sell them and if you sold for a profit (capital gains tax)
  3. No, investments are never taxed

14: What is a mortgage?

  1. A mortgage is a loan you take out to pay for a property
  2. A mortgage is a house that you bought
  3. A mortgage is a record of all of your loans

15: What should you invest in?

  1. You should only invest in low-risk securities like bonds and savings accounts so you don’t lose money
  2. You should only invest in higher-risk securities like stocks so that you can make a LOT of money
  3. You should diversify your portfolio, investing in both low and high-risk securities

Diving Deeper!

Do you want to earn some extra credit? Here are some more complex but essential questions to look into and answer yourself.

1: What are the different kinds of investments you can make?

2: How long does it take for your credit score to improve? How long to be completely forgiven?

3: How much money do you need for investing?

4: Should you invest in individual stocks or mutual funds and ETF’s?

5: What is the difference between an IRA and a 401(k)

*This is an important question and for those of you that have a job, definitely look into putting some of your money into a retirement account. It may seem like a long ways away, but that money will grow much more the earlier you put it in.

You should also look into:

  • The differences between custodial and roth IRAs
  • Custodial IRAs
  • Contribution limits

6: What’s the rule of 72 in compound interest?

This is an important rule to look into and it really shows the power of compound interest. Essential information!

7: What are the tax rules?

  • Explore the tax differences between selling your investments for a profit after holding them for more than one year vs less than one year
  • Do you have earned income? What would your taxes be?

Answers

Are you ready to check your work and see your perfect score? Here are the answers to the above questions:

1: 1

2: 3

3: 3

4: 3

5: 2

6: 2

7: 1

8: 1

9: 1

10: 2

11: 2

12: 1

13: 2

14: 1

15: 3

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