For something different to my normal blog posts, here are twelve questions about investments. Have a go and test your knowledge but don’t worry about your score. Hopefully it will be just a bit of fun and you’ll learn a thing or two. See if you can answer the questions from your own knowledge or alternatively make best guesses. There are no prizes. The answers will be published early next week.
1. What is a gilt?
An easy one to start.
(a) a corporate bond
(b) a UK government bond
(c) a type of gold
(d) the expression on your dog’s face when it pinches food off the kitchen table.
2. Place in order the following economies from highest to lowest in respect of the percentages of their GDP (gross domestic product, a measure of their economic output) that are imports and exports.
UK, US, Eurozone and China.
3. Your portfolio rises in value from £159,320 to £197,500. What is the percentage rise to two decimal points?
4. Which of the following statements about investment trusts are true? There may be more than one.
(a) They are open ended meaning the fund manager can create and redeem shares
(b) They can borrow to invest
(c) Their shares are listed and traded on a stock exchange
(d) They are required to distribute all income to investors as it arises
(e) They are good for holding illiquid assets.
5. Which of the following are considered safe haven assets during periods of economic and market stress? Again there may be more than one.
(a) Swiss Franc
(d) Japanese Yen
(e) High yield corporate bonds
(f) Shares in travel companies and airlines
(g) US Treasuries.
6. Which statements are generally true if Sterling falls in value against other developed market currencies such as the dollar, yen and Euro.
(a) The UK imports inflation
(b) UK exporters benefit in selling goods and services abroad
(c) Foreign holidays are cheaper for Brits
(d) Petrol prices are likely to fall
(e) The FTSE 100 index is likely to rise.
7. Which of the following statements about smaller companies are generally true?
(a) They are more likely to suffer more during recessions and economic downturns than larger companies
(b) In the long term smaller companies outperform larger companies
(c) Smaller companies don’t pay dividends
(d) Smaller companies are primarily exposed to the domestic, consumer economy
(e) Smaller companies funds are best managed passively using index tracking strategies.
8. Which of the following are normally positively correlated?
(a) Inflation and interest rates
(b) Interest rates and corporate bond prices
(c) Equities and bonds
(d) Unemployment and wage growth
(e) The win ratio of Barnsley football club and the UK economy.
9. Place in order the following equity markets in terms of the least to most expensive based on forward price to earnings ratios at 30/9/19
UK, US, Europe (ex-UK), Emerging Markets and Japan.
10. An individual has earned income of £18,000 in 2019/20. How much tax will he pay on £17,000 of dividends he receives from non-ISA investments in that tax year?
11. Someone invested £20,000 in a fund outside an ISA on 1/10/17. Two years later the investment is worth £27,000. The investor sells £6,000. How much is the realised capital gain for tax purposes?
12. Which of the following investments always pay returns free of income and/or capital gains tax to investors?
(a) Stocks and shares ISAs
(b) Premium Bonds
(c) Unit Trusts
(d) Venture Capital Trusts
(e) Structured Products
(f) NS&I Income Bonds.
Nothing in this test is intended as personal advice or a financial recommendation.