Investor's Quiz - How well do you know the markets?

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Ken Petersen: Today I’ll ask the questions and you try to answer them.  You can use these questions to start engaging conversations at cocktail parties or the gym.

1) The S&P 500 index is often considered to be the best single gauge of the U.S. equities market.  It includes a representative sample of large U.S. companies.  How low did the index go in 2009 and where was it on 12/31/2013? 

  • A. 995/1548
  • B. 857/1648
  • C. 777/1747
  • D. 677/1848

2) Which of the following investment asset classes performed best in 2013? 

  • A. Real Estate
  • B. Emerging Markets
  • C. Commodities
  • D. U.S. Small Company Stocks
  • E. Foreign (non-U.S.) Stocks 
  • F. Large U.S. Stocks?

3) Which of the asset classes in question #2 was down the most?

4) During every year, the S&P 500 drops.  In other words, it is doesn’t always close higher today than it did yesterday.  These drops can continue for weeks or months at a time.  And since 1980, the S&P 500 has had 8 negative years and 26 positive years, or about one down year out of every four.  If an intra-year drop is the largest drop from a high to a low during a year, what do you think the average intra-year drop is over the past 34 years? 

  • A. 10.4%
  • B. 12.4%
  • C: 14.4%
  • D. 20.4%?

5) The major components of the GDP are Consumption, Government Spending, Housing/Construction, and Investment ex-housing.  What percentage of our GDP consists of Government spending? 

  • A. 8.8% 
  • B. 18.8% 
  • C. 28.8% 
  • D. 38.8%?

6) We all know that when interest rates rise, bond prices fall.  What do you think happens to stock prices, on average, when interest rates rise?

  • A. They fall
  • B. They rise
  • C. It depends

7) The U.S. Projected Federal Budget outlay for the fiscal year 2013 was approximately $3.5 trillion.  What percentage of the projected budget outlay was for entitlements like Social Security, Medicare, and Medicaid? 

  • A. 18%
  • B. 28% 
  • C. 38% 
  • D. 48% 
  • E. 58%?

8) Five years ago, the U.S. National Debt was $10 Trillion.  How much is it today?

  • A. $11 Trillion
  • B. $13 Trillion
  • C. $15 Trillion
  • D. $17 Trillion.  

9) The average rate of inflation in the U.S. over the past 50 years is: 

  • A. 2.1% 
  • B. 3.1% 
  • C. 4.1% 
  • D. 5.1% 

10) The average annual earnings for a high school graduate who works full time is $32,493.  What is it for workers with college degrees?

  • A. $39,415
  • B. $49,415
  • C. $59,415
  • D. $69,415  

Answers:

1. D. The S&P 500 hit 677 on 3/9/09 and ended 2013 at 1848. 

2. D. U.S. Small companies finished the year up 38.8% as measured by the Russell 2000 index. 

3. C. Commodities were down -9.5% as measured by the Dow Jones UBS Commodity Index.

4. C

5. B

6. C. According to a study by J.P Morgan, correlations between weekly stock returns and interest rate movements from 1963 and 2013, as measured by 10-year Treasury yields, indicate that when interest rates are below 5% rising rates are generally associated with rising stock prices and when rising interest rates are higher than 5% stock prices decline. 

7.  D 

8.  D 

9.  C

10. C.

Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment manager and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to ken@montereypw.com.