Money Essentials

1. Between 1990 and 1999, stocks rose at
    19.4 percent
    18.1 percent
    15.3 percent
    9.4 percent
2. If you're looking for a place to invest money you'll need in a year or two, stocks are the place to be because they'll give you the best returns.
3. When interest rates rise, bond values:
    Stay the same
    It depends on what's happening in the stock market
4. What's the most important factor in the long-term movement of stock prices?
    Interest rates
    Money flows
    Investor sentiment
5. Which was the bigger stock market decline in percentage terms: the 508-point drop in the Dow Jones Industrial average on Oct. 19, 1987, or the 544-point drop on Oct. 28, 1997?
    The 508-point drop in 1987
    The 544-point drop in 1997
6. 1994 was the worst year for bonds in recent history. How steep was the loss for intermediate-term Treasuries?
    Down 14.4 percent
    Down 9.7 percent
    Down 6.2 percent
    Down 1.8 percent
7. The following year, those same bonds bounced back. What was their return in 1995?
    Up 14.4 percent
    Up 9.7 percent
    Up 6.2 percent
    Up 1.8 percent
8. U.S. Treasury bonds are generally considered the safest investments going. Why?
    Because their interest payments are exempt from state and local taxes
    Because the government can always print more money to make payments on them
    Because they are guaranteed by the Securities Act of 1934
    Because they are partially invested in the stock market
9. How long will it take to double the value of your investment, after inflation, if you keep your money in cash-like instruments earning the historical average of 3.7% a year.
    19 years
    39 years
    89 years
    139 years
10. Index funds based on the S&P 500 outperform most actively-managed funds over time because:
    They have low management fees
    Few fund managers can consistently beat the market average
    Their trading costs are minimal
    All of the above
11. Global funds typically invest where?
    In all parts of the world save for the U.S. market
    In all parts of the world including the U.S. market
    In all types of foreign investments, including stocks, bonds and real estate
    Mostly in emerging markets
12. When the stock market is headed up, junk bond funds tend to do what?
    Head in the opposite direction
    Go up as well
    Go broke
    There is no connection between the two
13. When the stock market is headed down, which of the following kinds of bonds typically prosper?
    Treasury bonds
    Corporate bonds
    Junk bonds
    None of the above
14. When investing in your 401(k), what should you worry about most?
    A stock market crash
    Falling interest rates
    A bond market crash
15. When people look back on the 1990s, which of the following events will be most memorable?
    The motherhood of Madonna
    John Glenn's return to space
    The bull market for U.S. stocks
    All of the above