The All Party Parliamentary Group (APPG) on Financial Education for Young People recently produced questions that test what it thinks GCSE-age children should know. Would you get an A*? Or are you nearer the bottom of your class?

Answers at the bottom.

**1. Kat paid £1500 for a car in April 2009. In the first year, the value of the car depreciated by 10 per cent. In the second year, the value of the car depreciated by 15 per cent. How much can Kat sell the car for in 2011?**

2. Hassan is paid £17,465 a year. His personal tax allowance is £6475 for the year.

a) What is his taxable income every month?

b) If Hassan’s income is taxed at 22 per cent, how much income tax does Hassan pay in a year?

**3. Lorna wants to buy 4 peppers. She will not use more than 4. The prices for peppers are as follows. Pack of 3 peppers £1.40. One pepper 59p. Special offer: Buy one pack of 3 peppers, get a second pack half price. What is the most cost effective option for Lorna? You must show working to support your answer.**

4. Leonie has £1750 to invest for 4 years and can choose between 2 different savings accounts.

Account 1: 3.7 per cent simple interest paid out at the end of each year

Account 2: 3.4 per cent compound interest paid at the end of the period

Which account would give Leonie more interest over the 4 year period?

**5. Jenny wants to buy a new TV but is £320 short. She sees an advert for a loan:**

**Loan: £320. Repayment period: 8 months. Monthly repayment: £46.72**

**If Jenny takes the loan, how much extra will she have to pay?**

6. Andrew pays his electricity bill every quarter. These are his September and December readings: September 1st: 10453kWh. December 1st: 12369kWh. His current tariff charges 32.7p per kWh for the first 200kWh and then 9.8p per remaining kWh. He can change to a new tariff that will have a standing charge of 47p per day and then charge 10.4p per kWh. September has 30 days, October has 31 days, and November has 30 days.

Which plan is cheaper for Andrew for this quarter?

**7. Rachel is going on holiday to Spain and needs to change £200 into Euros. The Bureau de Change in the airport charges 0.6 per cent or £4.00 to change money, whichever is the greater.**

**a) How much will changing her money at the airport cost Rachel?**

**After Rachel has paid this charge, the Bureau de Change offers an exchange rate of £1 = €1.16**

**If she goes to the Post Office before she leaves on holiday she does not pay any commission. The Post Office offers a rate of £1 = €1.12.**

**b) Where should Rachel change her money?**

8. This is Jason’s credit card statement.

Previous balance – £420.15 (Estimated interest assumes that the balance does not increase, you pay the minimum payment and the way we calculate interest stays the same.)

Payments received – £420.15

New transactions and interest – £566.26

Your closing balance – £566.26

Next month’s estimated interest – £6.71

Minimum payment due – £5.66

If you pay off the balance in full, you will not be charged any interest.

a) Assume that next month’s estimated interest is correct. Jason decides not to use his credit card any more. He decides to make the minimum payment. How much will Jason owe next month?

b) What advice would you give to Jason? You should use your answer to part a) in answering this question.

**9. Sophie is left £4,300 by her grandfather and decides to invest the money for 2 years. Her bank offers her a choice of two savings accounts.**

**Account 1: pays 3.1 per cent interest, with interest paid on a monthly basis**

**Account 2: pays 3.25 per cent interest, with interest paid annually**

**a) How much would Sophie get from each account over the first year?**

**b) Which account has a higher AER?**

*Answers:*

*1. (£1500 * 0.9) * 0.85 = £1,147.50. *

*2a. (£17,465- £6,475)/12 = £915.83, *

*b. (17,465 – £6,475) * 0.22 = £2,417.80*

*3. 4 peppers individually would cost 4 * 0.59 = £2.36. 1 multipack of 3, plus 1 individual pepper would cost £1.40 + 0.59 = £1.99. Buying two packs with the second at half price = £1.40 + 0.70 = £2.10. So the most cost-effective option is to buy a multipack and an individual pepper. *

*4. Account 1 would pay £1,750 * 0.037 * 4 = £259 over the four years. Account 2 would pay £1,750 * (1.034 ^ 4) = £250.42 over the four years. So Account 1 would give Leonie more interest. *

*5. 8 payments * £46.72 = £373.76. So taking the loan would mean Jenny would pay an extra £373.76 – £320 = £53.76. *

*6. Andrew has used 1916 kWh during the quarter (12369-10453 = 1916). His existing plan would charge (200*£0.327 = £65.40) for the first 200kWh and then (1716*£0.098 = £168.17) for the remaining 1716kWh. The total would therefore be £65.40 + £168.17 = £233.57. The new plan would charge (91 days * £0.47 = £42.77) in daily standing charges and (1916 * £0.104 = £199.26) for the 1916 kWh used. The total would therefore be £42.77 + £199.26 = £242.03. So Andrew’s current tariff is cheaper for this quarter – he shouldn’t switch tariffs.*

*7a. £200 * 0.6% = £1.20, so it will cost Rachel £4 to change her money at the airport.*

*b. The Bureau de Change would give (£200 – £4) * 1.16 = £227.36. The Post Office would give £200 * 1.12 = £224.00. So she should change her money at the Bureau de Change.*

*8a. £566.26 closing balance + £6.71 interest – £5.66 payment = £567.31 due next month.*

*b. If Jason can pay off the whole balance, he will not be charged any interest so this is the preferable option. If he can’t pay off the whole balance, he should at least pay off more than the interest each month, otherwise his debt will continue to grow.*

*9a. At the end of year one, Account 1’s closing balance would be £4,435.21 if she made no withdrawals. At the end of year one, Account 2’s closing balance would be £4,439.75 if she made no withdrawals.*

*b. Account 2 has the higher AER.*

**Source**

*These “GCSE-style” questions are taken from the All Party Parliamentary Group on Financial Education for Young People’s December 2011 **report**, which included them as examples that would test some of the financial knowledge it would like to see taught in schools.*

**Risk warning**

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