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Self Assessment Tool

Answer these questions to test your financial knowledge

1. Imagine you have 1,000 euros set aside in a bank account today. Suppose there is an annual inflation rate of 4%, do you think that in a year's time, with that 1,000 euro you will be able to...5 points

Correct! Inflation is a general incerasse in prices, so if there is inflation, a unit of currency (e.g. 1 euro) allows a smaller amount of goods and services to be purchased, in other words, its purchasing power is reduced.

Ops, that's not the correct one! Inflation is a general increase in prices, so if there is inflation, a unit of currency (e.g. 1 euro) allows a smaller amount of goods and services to be purchased, in other words, its purchasing power is reduced.

2. Imagine now that on the 1,000 euros you have in your account, the bank pays you an annual interest rate of 2%. In a year's time, if you make no withdrawals or deposits, and without taking account management fees into account, how much will your balance amount to?5 points

Correct! The interest rate represents the cost that is charged by the lender to the borrower and is expressed as a percentage. In this case the bank charges 2% so to calculate the monetary value you do 1000x2/100 (or 1000x0.02) = 20 euro.

Ops, that's not the correct one! The interest rate represents the cost that is charged by the lender to the borrower and is expressed as a percentage. In this case the bank charges 2% so to calculate the monetary value you do 1000x2/100 (or 1000x0.02) = 20 euro.

3. After 5 years with the annual interest rate at 2%, how much will your account balance amount to if you make no withdrawals or deposits, and without taking the management fees into account?5 points

Correct! When a sum of money remains on a deposit for several years, interest is calculated at the end of each year. The interest that accrues at the end of each period (e.g. the first year) is added to the capital. The total amount - consisting of the capital plus accrued interest in that period - is the basis, i.e. the new capital for calculating the interest for the following period (e.g. the second year). Interest is therefore said to be capitalised and this mechanism is referred to as the 'law of compound interest'.

Ops, that's not the correct one! When a sum of money remains on a deposit for several years, interest is calculated at the end of each year. The interest that accrues at the end of each period (e.g. the first year) is added to the capital. The total amount - consisting of the capital plus accrued interest in that period - is the basis, i.e. the new capital for calculating the interest for the following period (e.g. the second year). Interest is therefore said to be capitalised and this mechanism is referred to as the 'law of compound interest'.

4. What does it mean to make a budget?5 points

Correct! A budget is a provisional list of expected income and expenditure in a subsequent time interval. Making a budget means, in the first important step, to understand which expenses are really important, and to plan them accordingly with respect to what we have and receive regularly, i.e. with respect to income.

Ops, that's not the correct one! A budget is a provisional list of expected income and expenditure in a subsequent time interval. Making a budget means, in the first important step, to understand which expenses are really important, and to plan them accordingly with respect to what we have and receive regularly, i.e. with respect to income.

5. Imagine you make a plan of the income and expenditure you expect to have for the coming month. Which of these items of expenditure is incorrect to allocate among the monthly expenses?5 points

Correct! For the correct preparation of a monthly budget, you must consider only expenses recurring monthly. For those extraordinary or even recurring expenses but which are not monthly, you have to calculate the portion pertaining to the month (if the insurance is annual, you have to divide the total by the 12 months of the year, i.e. consider the twelfth part of the amount paid).

Ops, that's not the correct one! For the correct preparation of a monthly budget, you must consider only expenses recurring monthly. For those extraordinary or even recurring expenses but which are not monthly, you have to calculate the portion pertaining to the month (if the insurance is annual, you have to divide the total by the 12 months of the year, i.e. consider the twelfth part of the amount paid).

6. Which of the following statements about gross and net income is incorrect?5 points

Correct! Gross income is the total amount you earn (usually over the course of a year) before expenses. Therefore, gross income is used to calculate net income. Understanding the difference is important when we have to make economic decisions.

Ops, that's not the correct one! Gross income is the total amount you earn (usually over the course of a year) before expenses. Therefore, gross income is used to calculate net income. Understanding the difference is important when we have to make economic decisions.

7. Which of the following is not a debit card (ATM card) feature?5 points

Correct! When we use a debit card, the charges made are debited immediately from our payment account, so there is no advance from the bank, no financing. This feature is the main difference between a credit card and a debit card.

Ops, that's not the correct one! When we use a debit card, the charges made are debited immediately from our payment account, so there is no advance from the bank, no financing. This feature is the main difference between a credit card and a debit card.

8. Which of these is not a credit card feature?5 points

Correct! The credit card makes it possible to buy goods and services even without having the money needed for the purchase in one's current account; the amount spent will in fact be debited from the buyer's account at a later date.

Ops, that's not the correct one! The credit card makes it possible to buy goods and services even without having the money needed for the purchase in one's current account; the amount spent will in fact be debited from the buyer's account at a later date.

9. Imagine you have a second house which you don't use and that you keep closed. How much money are you loosing monthly?5 points

Correct! When you make a choice that has economic consequences, in addition to the explicit costs (i.e. those that result in a direct cash out), you should also consider the possible implicit costs of a choice, such as lost income or the possibility of saving for something more useful and beneficial. This concept is known as 'opportunity cost', i.e. the value of the best alternative use we can make of our resources.

Ops, that's not the correct one! When you make a choice that has economic consequences, in addition to the explicit costs (i.e. those that result in a direct cash out), you should also consider the possible implicit costs of a choice, such as lost income or the possibility of saving for something more useful and beneficial. This concept is known as 'opportunity cost', i.e. the value of the best alternative use we can make of our resources.

10. Your car insurance is about to expire and while you are scrolling through the news on your phone, a banner ad appears offering you car insurance at a cheaper promotional price than the one you took out last year. To take up the offer, however, you have to subscribe within two hours. What do you do?5 points

Correct! You must be very careful with online promotions that are automatically proposed to us; they often lead us to make hasty and uninformed purchases. It is always a good idea to find out all the conditions applicable to the offer, to make comparisons, even through online comparators, and/or to ask for a quote from a physical shop before signing up.

Ops, that's not the correct one! You must be very careful with online promotions that are automatically proposed to us; they often lead us to make hasty and uninformed purchases. It is always a good idea to find out all the conditions applicable to the offer, to make comparisons, even through online comparators, and/or to ask for a quote from a physical shop before signing up.

11. If you have to apply for a loan (e.g. a loan), what parameter allows you to compare the cost of financing between proposals from different lenders5 points

Correct! The APR is the annual interest equivalent to the nominal rate offered by the bank, and indicates the real cost of the loan as a percentage. The difference is that the agreed nominal interest rate is assuming that all interest is paid once at the end of the year, not month by month as usual. The nominal interest rate does not include other expenses and commissions that make the operation more expensive.

Ops, that's not the correct one! The correct one is the APR, which indicates the total cost of financing expressed as an annual percentage of the credit granted. It includes interest and all other charges and considers that you are paying the interests month by month included in your installment payment. APR is the indicator that makes it possible to compare financing offers for the same amount and duration, so when choosing a loan, it is advisable not to be swayed only by the convenience of the nominal interest rate only, which does not include all expenses and is always lower than the APR.

12. Is it possible to find a very profitable financial investment without risk?5 points

Correct! A high return generally rewards high risk-taking on invested capital.

Ops, that's not the correct one! A high return generally rewards high risk-taking on invested capital.

13. What is a share?5 points

Correct! A share, in the finance world, is a financial security representing a share in the ownership of a public limited company. Together with bonds and derivatives, it is part of securities. The holder is called a shareholder and the total number of shares in the company is called 'share capital'.

Ops, that's not the correct one! A share, in the finance world, is a financial security representing a share in the ownership of a public limited company. Together with bonds and derivatives, it is part of securities. The holder is called a shareholder and the total number of shares in the company is called 'share capital'.

14. If you have a little money set aside in your bank account that you do not need immediately, which of these choices is the financially wisest:5 points

Correct! If you have a certain amount of savings set aside that you probably do not need in the immediate future, leaving it in your current account is not the best option as account management costs and inflation could erode your savings. At the same time, always avoid investing your money in shares of one company, but diversify your investments across several financial securities to reduce risk. If you are in doubt get advice from a trusted financial advisor!

Ops, that's not the correct one! If you have a certain amount of savings set aside that you probably do not need in the immediate future, leaving it in your current account is not the best option as account management costs and inflation could erode your savings. At the same time, always avoid investing your money in shares of one company, but diversify your investments across several financial securities to reduce risk. If you are in doubt get advice from a trusted financial advisor!

15. Imagine you have to open a bank account, which of these aspects helps you to understand whether a bank operates ethically...5 points

Correct! A financial product, such as a bank account, just like any product we buy at the supermarket, also has a social and environmental impact, and it is advisable to take this aspect into consideration in order to make a conscious and positive choice for society. In the case of banking products, we should find out what kind of investments banks make with our savings (some banks, for example, invest in weapons or fossil fuels, which we know are the cause of climate change). And the fact of making donations or philanthropy does not replace the lack of ethics, but it is only an image wash.

Ops, that's not the correct one! A financial product, such as a bank account, just like any product we buy at the supermarket, also has a social and environmental impact, and it is advisable to take this aspect into consideration in order to make a conscious and positive choice for society. In the case of banking products, we should find out what kind of investments banks make with our savings (some banks, for example, invest in weapons or fossil fuels, which we know are the cause of climate change). And the fact of making donations or philanthropy does not replace the lack of ethics, but it is only an image wash.

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