Less Than 25% Of College Graduates Can Answer These 4 Simple Money Questions

April 21, 2019 in News by Slad

Source: www.zerohedge.com
by Tyler Durden  Authored by Mac Slavo via SHTFplan.com,

Americans have become numb to financial intelligence. This is no more evident than a recent Sallie Mae survey, which indicated that college graduates can’t even answer simple questions about financial concepts, such as interest.

The statistics are not looking good for the United States, a nation deeply indebted, addicted to consumerism, and woefully ignorant about it all.  Not long ago, SHTFPlanreported that a mere 1 in 10 Americans is actually capable of getting an A on a basic financial security test

And even college graduates, who are likely tens of thousands (if not more) dollars in debt because of school, learned little to nothing about handling their personal finances. The big red flag comes from consumer banking firm Sallie Mae. The firm released its new “Majoring in Money” study which asked hundreds of current and recently graduated college students up to age 29 about basic financial concepts. The results are worrisome.

Sallie Mae asked these individuals four questions related to credit and interest, and fewer than one in four got all four of these correct.

1. Interest accumulation: 
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?
a. More than $102
b. Exactly $102
c. Less than $102
d. Not sure

2. Effects of payment behavior on credit cost: 
Assuming the following individuals have the same credit card with the same interest rate and balance, which will pay the most in interest on their credit card purchases over time?
a. Joe, who makes the minimum payment on his credit card bill every month
b. Jane, who pays the balance on her credit card in full every month
c. Joyce, who sometimes pays the minimum, sometimes pays less than the minimum and missed one payment on her credit card bill
d. All of them will pay the same amount in interest over time
e. Not sure

3. Impact of repayment term on cost of credit: 
Imagine that there are two options when it comes to paying back a loan and both come with the same interest rate. Provided you have the needed funds, which option would you select to minimize your total costs over the life of the loan (i.e., all of your payments combined until the loan is completely paid off)?
a. Option 1 allows you to take 10 years to pay back the loan
b. Option 2 allows you to take 20 years to pay back the loan
c. Both options have the same out-of-pocket cost over the life of the loan
d. Not sure

4. Interest terminology: 
Which of the following best defines the term “interest capitalization”?
a. The type of interest charged on high-balance loans
b. The addition of unpaid interest to the principal balance of a loan
c. Interest that is charged when you postpone payments on your loan

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