Twenty Questions about Investing: The Answers


1. When interest rates go up, bond prices

2. If a share is selling at $60 a share and earning $6 a share, it is said to be selling at a P/E ratio of how much?

3. If you don’t redeem your mutual fund shares, you don’t have to pay any taxes.
(outside of a tax deferred plan, taxes may be owed on interest and dividend income)

4. In the past 10 years, over 70 percent of mutual funds have under-performed S & P 500 index.

5. When interest rates are rising, the stock market isn't usually as strong as it is when rates are falling.

6. Rate the level of risk associated with each of the following investments on a scale of 1-4, where 1 is low, 2 is limited, 3 is moderate and 4 is high:

Real estate investment trusts 

B-rated bonds

Blue chip stocks  

Money market funds 

Small company stocks

Shares of a mining company

Futures, options, and other derivatives   

7. Open-end mutual funds sell securities at a price based on their net asset value, and those shares are usually redeemed at their net asset value.

8. Securities firms are obligated to insure their mutual funds.

9. What type of mutual fund generally has the highest expense ratio?

10. A balanced mutual fund:

11. What percentage of the world's securities are traded outside the United States?

12. What comprises the DJIA?

13. What are mutual fund expense ratios?

14. When you sell a mutual fund share, what is the cost basis used for determining a gain or loss?

15. Which of the following are true of common shares:

16. Corporations split their shares to:

17. In the event that a company is liquidated, preferred shareholders rank above:

18. Dividends not paid on a preferred share are lost to the investor unless the share has a:

19. When shares trade cum-dividend, purchasers of the shares receive the dividend as well.

20. Since stock exchanges have a minimum price requirement before more shares may be issued, companies sometimes raise the price of their shares to meet the exchange's requirements using a.

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