What the test covers
The ten questions cover five ideas that sit behind most everyday money decisions: interest and compounding, inflation, borrowing, investing and risk and risk and probability. None of them need a calculator; they test whether you know how these ideas behave.
Seven are the questions the FINRA Investor Education Foundation asks in its National Financial Capability Study, a survey of more than 25,000 US adults. Because they’re the same questions, you can see how your answers compare. The other three are classic questions on percentages, compound interest and inflation.
How US adults do on these questions
In the 2024 survey, only 4% of US adults answered all seven FINRA questions correctly, and 46% got at least four right. Over the five questions asked in every survey since 2009, the share getting at least four right fell from 42% in 2009 to 32% in 2021, and stayed at 32% in 2024.
| Question | US adults who got it right (2024) |
|---|---|
| Interest and compounding: 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? | 69% |
| Borrowing: a 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less. | 69% |
| Inflation: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account? | 58% |
| Investing and risk: buying a single company’s stock usually provides a safer return than a stock mutual fund. | 41% |
| Risk and probability: Which of the following indicates the highest probability of getting a particular disease? | 35% |
| Interest and compounding: Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double? | 29% |
| Investing and risk: If interest rates rise, what will typically happen to bond prices? | 25% |
The hardest questions were about bonds and about how fast debt doubles. Both are about compounding and interest rates, which shape the cost of every loan and the growth of every savings account.
Why it matters
Economists Annamaria Lusardi and Olivia Mitchell, who designed three of these questions (interest, inflation and risk), reviewed the research on financial literacy in 2014. It connects what people know about these ideas with the choices they make about saving, borrowing and planning for retirement, and it finds some groups consistently know less than others.
The good news is that these ideas are learnable, and the best way to learn them is to try them on real numbers. See how interest on interest adds up with the compound interest calculator, what a longer or shorter mortgage costs with the mortgage calculator, and how slowly a minimum payment clears a balance with the credit card debt calculator.
All the answers
Spoilers: take the test first.
1. 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?
Answer: More than $102. 2% of $100 is $2, so you’d have $102 after just one year. Leave it for five years and every year adds more interest, on top of the interest already earned: $100 × 1.02⁵ = $110.41.
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?
Answer: Less than today. Your money grows by 1%, but prices grow by 2%. After a year, $100 has become $101, while things that cost $100 today cost $102. When inflation is higher than the interest you earn, your savings buy less, even though the balance went up.
3. Suppose you need to borrow $100. Which is the lower amount to pay back: $100 plus 3% or $105?
Answer: $100 plus 3%. $100 plus 3% is $100 × 1.03 = $103, which is less than $105. Turning percentages into dollar amounts like this is the easiest way to compare two loan offers.
4. True or false: buying a single company’s stock usually provides a safer return than a stock mutual fund.
Answer: False. False. One company can have a bad year, or fail completely, and a single stock goes down with it. A stock mutual fund spreads your money across many companies, so one company’s trouble hurts much less. This is diversification: not putting all your eggs in one basket.
5. Suppose you deposit money in the bank for two years, and every year the bank adds 15% to your account. Will the same amount of money be added both years, or will more be added in the second year?
Answer: More in the second year. The bank pays interest on everything in the account, including interest it has already paid. Deposit $100 and the first year adds $15, so the second year starts at $115 and adds $115 × 15% = $17.25. That’s compound interest.
6. True or false: a 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.
Answer: True. True. You pay the loan off in half the time, so each payment is bigger, but interest has far less time to build up. On a $300,000 loan at 6%, a 15-year mortgage costs about $2,532 a month and $155,700 in interest; a 30-year mortgage costs about $1,799 a month and $347,500 in interest.
7. Suppose that in 10 years your income doubles, but the prices of the things you buy also double. Will you be able to buy more than today, the same as today, or less than today?
Answer: The same as today. What matters is what your money can buy, not the number on your payslip. If your income and prices both double, each dollar buys half as much, which exactly cancels out the raise. If prices rose faster than your income, you could buy less even while earning more.
8. Which of the following indicates the highest probability of getting a particular disease?
Answer: There is a one-in-twenty chance of getting the disease. Put them all in the same terms. One in twenty is 5%. 25 out of 1,000 is 2.5%. So one in twenty is the highest, twice as likely as 25 in 1,000. Comparing risks and returns written in different ways comes up all the time in money decisions.
9. Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
Answer: At least 2 years but less than 5 years. Interest is charged on the interest too: $1,000 becomes $1,200 after one year, $1,440 after two, $1,728 after three and $2,073.60 after four. It doubles in under four years. It’s tempting to answer five years (20% × 5 = 100%), but that ignores compounding. That’s why unpaid debt at a high rate grows so fast.
10. If interest rates rise, what will typically happen to bond prices?
Answer: They will fall. They fall. A bond you already own pays a fixed rate of interest. When rates rise, new bonds pay more, so nobody will pay full price for your lower-paying one, and its price drops until its return matches the new bonds. The SEC puts it simply: interest rates and bond prices move in opposite directions.