Question
Survey
Your gender:
( Male
( Female
Your undergraduate/graduate major :
( Business-related (finance, econ, acc'ting, etc)
( Math-related (engineering, science, stats, etc)
( Liberal arts (the rest)
Your investment experience:
( Significant
( Some
( None
Your experience with spreadsheets like EXCEL …
( Accomplished
( Moderate
( Some
( None
Questions on investing (choose best answer):
1. If you buy a company’s stock …
( the company will return your original investment, with interest
( you are liable for the company’s debts
( you own a part of the company
( you have lent money to the company
( Don’t know
2. If you buy a company’s bond …
( you can vote on shareholder resolutions
( you are liable for the company’s debts
( you own part of the company
( you have lent money to the company
( Don’t know
3. Which type of bond is the safest?
( Municipal bond
( Corporate bond
( US Treasury bond
( Don’t know
4. Which of the following best defines a “junk bond”?
( A bond rated below “investment grade” by rating agencies
( A bond that has declined dramatically in value
( A bond that has defaulted
( A bond that is not regulated
( Don’t know
5. In general, if interest rates go down, bond prices …
( go down
( go up
( are not affected
( Don’t know
6. A “no load” mutual fund is one that …
( carries no fees
( carries no up-front sales charges
( does not contain high-risk securities
( has no limits on when it can be bought or sold
( Don’t know
7. In general, higher-risk investments tend to provide higher returns over time than lower-risk investments.
( True
( False
( Don’t know
8. Over the last 20 years in the United States, the best average returns have been generated by
( precious metals
( money market accounts
( bank CDs
( bonds
( stocks
( Don’t know
9. Based on past performance, the average return you expect from a broadly-diversified US stock mutual fund over the long run is …
( 5 percent
( 10 percent
( 15 percent
( 20 percent
( 25 percent
( Don’t know
10. Which organizations insure investors against losses in the stock market?
( Securities and Exchange Commission (SEC)
( Federal Deposit Insurance Corporation (FDIC)
( Securities Investor Protection Corporation (SIPC)
( National Association of Securities Dealers (NASD)
( None of these
( Don’t know
Questions on mutual funds (choose best answer):
11. A mutual fund’s performance is best measured by:
( Income return.
( Total return.
( Yield.
( Capital gains distributions.
( Don’t know.
12. If a mutual fund charges an expense ratio of 1% in 2008:
( You will pay a one-time fee amounting to 1% of the number of shares held in the account.
( Your fund investment’s returns will be reduced by 1% in 2008 and each year thereafter.
( Your fund investment is reduced by 1% at the time you buy shares.
( You will pay a sales charge of 1% to a broker at the time you buy shares.
( Don’t know.
13. Mutual funds report an expense ratio that includes (check all that apply):
( Management (advisory) fees.
( Trading costs.
( Sales loads.
( Don’t know.
14. Money market funds are always priced at $1/share and never fall in value:
( True
( False.
( Don’t know.
15. The goal of an index mutual fund is to:
( Track the investment return of a specified stock or bond benchmark.
( Beat the investment return of a specified stock or bond benchmark.
( Buy only stocks in the S&P 500 index.
( Invest in the best-performing sectors of the stock market.
( Don’t know.
16. Dollar cost averaging is:
( A strategy that entails buying low and selling high.
( A way to sell fund shares to minimize capital gains.
( An approach in which you invest the same amount of money in a fund at regular intervals.
( Don’t know.
17. From 1926 to 2001, the average total return per year for the U.S. stock market was:
( 4% per year.
( 11% per year.
( 22% per year.
( 33% per year.
( Don’t know.
18. If your mutual fund holds only U.S. stocks, you can reduce your overall risk by changing to a global stock fund.
( True.
( False.
( Don’t know.
19. Which type of investment has generally offered the best protection against inflation over long periods of time?
( Bank savings accounts.
( Money market funds
( Stocks.
( Bonds.
( Don’t know.
20. Generally, a portfolio that has 80% of its assets invested in stocks would be best suited for:
( An 18-year-old using the assets to pay for college expenses over the next 4 years.
( A 35-year-old investing for retirement.
( A 75-year-old investing for income and capital preservation.
( Don’t know.
Questions on finance terminology and principles (choose best answer):
21. Subprime mortgage loans …
( have an interest rate set below the "prime interest" rate
( are made to customers with a weak credit history
( cannot be sold to institutional investors
( Don't know
22. An ARM (adjustable rate mortgage) carries an interest rate that …
( varies with prevailing interest rates, often pegged to an index
( can fall, but cannot rise
( rises after the first year
( Don’t know
23. A CDO (or collateralized debt obligation) ...
( is guaranteed by the federal government
( reflects a portfolio of fixed-income assets, such as mortgage loans
( has less risk than the underlying collateral
( Don't know
24. A CDS (or credit default swap) is a contract in which …
( one party (for a premium) agrees to pay another party if a financial instrument defaults
( a regulated insurance company insures against financial defaults
( the party holding the CDS can choose not to mark its value to market
( Don't know
25. The Efficient Capital Market Hypothesis posits that capital markets …
( create opportunities for sophisticated investors to exploit unsophisticated investors
( reflect all publicly-available information about market-traded investments
( provide transparency in the buying and selling of market-traded investments
( Don’t know
26. The Theory of the Firm explains …
( why corporations seek to maximize shareholder wealth
( why equity shareholders vote, but debt creditors do not
( why some enterprises have employees and others contract for freelance labor
( Don’t know
27. The modern Portfolio Theory …
( measures portfolio risk according to the riskiest investment in the portfolio
( posits that low-risk assets negate the risk of high-risk assets in a portfolio
( suggests that rational investors will diversify their portfolio to lower risk
( Don’t know
28. Agency Costs …
( cannot arise if principals and agents have equal access to information
( arise when owner interests diverge from management interests
( are eliminated in the corporation through voting and liquidity rights
( Don’t know
29. Transparency in capital markets …
( means that all market prices are known
( means that price-related information is available to market participants
( exists because of government regulation
( Don’t know
30. Externalities are …
( costs that the government imposes on firms, without compensating the firms
( costs that one firm imposes on another as a form of competition
( costs that firms impose on society, without the firms bearing the social costs
( Don’t know
Bonus. In the “Subprime primer,” the pension fund that gets stuck holding non-paying CDOs is from …
( Arizona
( Cayman Islands
( Norway
□ Seattle
□ Oz
................
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