Financial Literacy Test

What is one difference between commercial banks, credit unions, and local banks?

• Everyone can use a Credit unions are nonprofit, while local banks are for small businesses only

• Commercial banks only offer loans, while credit unions only offer savings accounts

• Local banks are owned by the government, while credit unions are privately owned

• There is no difference; they all offer the same services

Which of the following is a key characteristic of credit unions?

• They are for-profit institutions

• They charge higher interest rates than commercial banks

• They are member-owned and nonprofit

• They offer fewer services than commercial banks

What is the main advantage of using a local bank over a commercial bank?

• Higher interest rates on loans

• Local banks typically have more branches

• More personalized customer service

• Fewer fees than national banks

Which of the following is a characteristic of index funds?

• They attempt to outperform the market

• They invest in a broad range of assets to mirror a market index

• They have high management fees

• They are risk-free investments

How do exchange-traded funds (ETFs) differ from mutual funds?

• ETFs are only available in retirement accounts

• ETFs can be traded throughout the day like stocks, while mutual funds are bought or sold at the end of the day

• Mutual funds have no management fees

• ETFs are generally safer investments than mutual funds

What is the main difference between mutual funds and index funds?

• Mutual funds are more tax-efficient than index funds

• Mutual funds are actively managed, while index funds are passively managed

• Index funds are only available in retirement accounts

• Mutual funds are cheaper to invest in than index funds

What is a bond?

• A share in a company's ownership

• A type of loan issued by an organization or government to raise funds

• A savings account offered by banks

• A type of stock

Which of the following is the primary difference between stocks and bonds?

• A) Stocks represent ownership in a company, while bonds represent debt

• B) Stocks are risk-free, while bonds have varying risk levels

• C) Bonds provide dividends, while stocks provide interest

• D) Stocks mature after a set time, while bonds are perpetual

Which of the following types of bonds is issued by a corporation to raise capital?

• Municipal bonds

• Federal bonds

• Corporate bonds

• Treasury bonds

What is a key characteristic of municipal bonds?

• They are issued by private corporations

• They are issued by local or state governments

• They are considered the highest-risk bonds

• They are not taxed at all