Eight Financial Practice Questions and How to Check Your Answers

Key Takeaways:

These original practice questions are educational, not a validated national literacy test.
Explain the reasoning before checking the answer.
Use uncertainty to identify a topic to study, rather than guessing at a personal financial decision.

A short exercise can reveal concepts worth reviewing. The eight questions below are original examples, not the TIAA Institute–GFLEC P-Fin 8 questionnaire. Their difficulty and scoring have not been validated, so your result cannot be compared with a national survey average.

Try the questions first

1. With no fees or additional deposits, $100 earns 5% in one year and the interest stays invested. What balance begins the second year?

2. If a purchase rises from $100 to $110 while your spending money stays at $100, has your purchasing power increased or decreased?

3. An account charges $4 monthly with no other fees. What is the annual cost?

4. Does owning three funds concentrated in the same industry necessarily provide broad diversification?

5. A portfolio worth $200,000 falls by 10%. What is its new value before withdrawals or other changes?

6. A household spends $36,000 annually and receives $24,000 of other income. What amount remains to be funded before taxes or missing expenses?

7. Does a higher Social Security retirement benefit for waiting to claim automatically mean the household can afford every year before that date?

8. Does Medicare generally pay for most long-term care consisting of help with everyday activities?

Check the reasoning

1. $105. The first year's $5 interest is part of the next year's starting balance. A later rate, fee or withdrawal could change subsequent growth.

2. Decreased. The available money no longer buys the same purchase. A household's experience depends on the prices of what it actually buys.

3. $48, calculated as $4 times 12. Check whether real accounts have additional charges or waiver conditions.

4. No. Fund holdings can overlap. Investor.gov recommends examining diversification within and across asset classes rather than counting fund names.

5. $180,000. A $20,000 decline is 10% of the starting $200,000. A later percentage gain applies to the new balance.

6. $12,000. This is a funding gap, not a recommended or sustainable investment withdrawal.

7. No. SSA's claiming estimates and the resources available before claiming answer different questions. Price the interim spending gap separately.

8. No. Medicare explains that most nonmedical long-term care is not covered. Check the specific service and any other coverage.

Turn the result into useful work

Choose a missed question connected to an upcoming decision. Read the relevant primary source, work another example and explain it in your own words. If you want to use a validated literacy instrument, consult the original P-Fin materials and their instructions. Do not treat success on this informal exercise as proof of readiness to buy a financial product.