Tuesday, July 22, 2008

Are You Financially Literate?

Dartmouth Econ. Prof. Annamaria Lusardi has devised the following test to determine a person's financial literacy. The results are disturbing. Only one third of the respondents that were older than fifty managed to get all three questions right. For the answers to the three questions and an interesting interview with Prof. Lusardi, follow this link.

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

a. More than $102
b. Exactly $102
c. Less than $102
d. Do not know

2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After 1 year, would you be able to buy more than, exactly the same as, or less than today with the money in this account?

a. More than today
b. Exactly the same as today
c. Less than today
d. Do not know

3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”

a. True
b. False
c. Do not know

P.S. More on Lusardi here.


Dave '96 said...

These questions are so ridiculously easy I hope 100% of Dartmouth students get them correct. The 2% interest one would be a little more interesting if the choice was above or below $110, at least then it would be a test of whether you understand compounding.

Warren Soros said...

Suppose a company has outstanding 8 million shares of Class A stock, 8 million shares of Class B stock, and 2 million shares of Class C stock. You and your family control the Class B shares. The Company issues 8 million additional shares of Class A stock. Has your interest been diluted, or is it the same as before?

Golden Goldman Alum said...

Another financial test:
Over time generous benefactors have made donations for a recreational club's maintenance of cabins, resulting in an endowment specific to this purpose of $1,000,000. The endowment throws off 5% or $50,000 per year in dividends. What are the best uses of the $50,000:
1. Spend it all, even if annual cabin maintenance only requires $5,000 per year.
2. Ask that it be reinvested as additional endowment capital; it will help increase future earnings by $2,500/year (5% of $50,000), but will never again be available for direct needs.
3. Reserve the extra $45K of it in a special account, until after 4 years it builds to $180,000 and can be used in support of club members building a major new cabin from scratch.
4. Do nothing, so it can help offset Student Life Department social programming like Kick-@$$ parties and training by the Sexperts.

This question is formulated with a bit of understanding of how university endowments and politics work. Its formulation and the correct answer are not based upon any confidential information; similarities to any real situation is purely coincidental.

thank you dave 96 said...

These questions are so ridiculously easy I hope 100% of Dartmouth administrators get them correct.

A Concerned Trustee said...

If contributions to pet projects, like those found at Ivy League colleges, were no longer tax deductible, what would you do?

a) I'd give the money anyway;
b) I'd give the money to a real charity;
c) I'd let my kids inherit more.
d) I'd blow more on my bimbo.

Bimbo said...

Honey, If you don't say d, I'll hide your pills

parody slate said...

I wouldn't be so sure all students will get the right answers. Some students believe that if you want to be able to vote for a corporation's directors, all you have to do is consume its services.

anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...
This comment has been removed by a blog administrator.
power leveling said...

I got to play Assassin's Creed which kind of disappointed me. There is some great work in there, great work. The art is fantastic...the levels in that game are huge. The free running things works really well and feels wow power leveling great to control, though after awhile the joy and awe kind of wares off. I hated the story...the whole setting kind of frustrated me. I was so completely looking forward to playing as an assassin during the Crusades. When I first heard the wow powerleveling concept for the game and awe the screenshots I was pretty jazzed. That excitement was quickly smothered when I found out I was a descendant of Altair and I was in a simulation. Great...a game within a game. That really kind of spoiled the whole thing for me. I played about halfway through the game before I completely stopped. I think the wow gold sequel that is inevitably going to get made will be pretty good...though I think they have kind f locked themselves into the whole genetic memory story thread. There is some really great stuff in that game, but the story, and combat really kind of killed it for me. The combat is still not that great of an improvement over the POP stuff. It is decent, but it feels like it could be so much better if they would just give the power leveling player more control over the character.

Anonymous said...




A片,色情,成人,做愛,情色文學,A片下載,色情遊戲,色情影片,色情聊天室,情色電影,免費視訊,免費視訊聊天,免費視訊聊天室,一葉情貼圖片區,情色,情色視訊,免費成人影片,視訊交友,視訊聊天,視訊聊天室,言情小說,愛情小說,AIO,AV片,A漫,av dvd,聊天室,自拍,情色論壇,視訊美女,AV成人網,色情A片,SEX