Here’s a Quiz for Investors About 1987
Black Monday. Tax reform. Roller-coaster interest rates. These and other items made 1987 a memorable--and sometimes painful--year for investors.
How memorable? The following quiz will test your recollection of the year’s investment events or will give you new knowledge. A score of 25 points or more, out of a possible 36, probably means you are an investment whiz. A score between 10 and 24 points means you are (or can be) a serious investor. If you score below 10, however, you probably didn’t pay much attention to investments in 1987.
Good luck!
1. Black Monday, Oct. 19, was the single biggest event of 1987 for investors. How many points did the Dow Jones industrial average lose that day? (one point) What was the close? (one point if within 50 points) What was the percentage decline in the Dow average? (one point if within four percentage points)
2. A Supreme Court decision last year involving Shearson Lehman Bros. had a major bearing on investor complaints against brokers. What was the court’s basic finding? (one point)
A. That investors should not be required to sign arbitration agreements.
B. That investors can receive triple damages in arbitration.
C. That investors are bound to use arbitration if they sign arbitration agreements.
3. Many people holding municipal bond mutual funds lost money in late spring and early summer last year. What was the main cause of their losses? (one point)
A. A surge in defaults among municipal bond issuers.
B. Limits on issuance of bonds under tax reform.
C. Higher interest rates.
D. None of the above.
4. Under a new program called Treasury Direct, the government: (one point)
A. Deposits interest or principal on Treasury securities directly into investors’ bank accounts.
B. Expands the number of brokerages directly allowed to sell Treasury securities.
C. Allows individual investors to sell Treasury securities directly back to the government.
D. None of the above.
5. You sold your stocks at a loss last year just after the market crash. You can use those losses to offset up to how much of your ordinary income from wages and salaries last year? (1 point)
A. None.
B. $3,000.
C. $5,000.
D. Up to 20%.
6. The American Eagle gold coin was introduced in 1986 and soon became the best-selling bullion gold coin in the United States. Which of the following bullion coins were introduced last year? (one point)
A. Chinese Panda.
B. Australian Nugget.
C. British Britannia.
D. A and B.
E. B and C.
7. Which of the following groups of mutual funds earned the highest profit for all of 1987? (one point)
A. International stock funds.
B. Government bond funds.
C. Gold funds.
D. Utility funds.
8. Single-premium life insurance gained popularity in 1987 under tax reform. Which of the following are generally considered advantages of the plan? (one point)
A. Congress has agreed to preserve their tax advantages, which allow investment earnings to build tax-free.
B. You can borrow from the plan at virtually no cost.
C. There usually is no penalty for terminating the plan early.
D. All of the above.
E. None of the above.
9. Which of the following investors gained from the October stock market crash and its immediate aftermath? (one point)
A. Sellers of put options.
B. Holders of long-term Treasury bonds.
C. Holders of gold mutual funds.
D. All of the above.
E. None of the above.
10. Closed-end mutual funds proliferated in the bull market. Which of the following characteristics are true of these funds? (one point)
A. Their shares are traded on stock exchanges.
B. It is usually best to buy shares at their initial public offering.
C. The funds add new shares whenever new investors buy in.
D. All of the above.
E. None of the above.
11. A newsletter editor in Georgia made news for calling several market selloffs and for predicting that the Dow Jones industrial average would hit 3,600 in 1988. Name the newsletter editor and his newsletter. (one point each, two points total)
12. What were the 1987 highs, based on daily market closes, of the following items? (one point each if within 10%, three points total)
A. Dow Jones industrial average.
B. Gold (Comex spot contract price).
C. Silver (Comex spot contract price).
13. The art market was astounded in November when a painting by Vincent van Gogh set a new record for any art work sold at auction. What was the name of the painting? (one point) What was the price? (one point if within 10%)
14. American Express caused a stir in 1987 when it introduced a new credit card with an initial interest rate of 13.5% that allowed cardholders to pay off only part of their monthly account balances instead of the entire balance. What is the name of the card? (one point)
15. Match the following rates with the appropriate item: (one point each, five points total)
Rates: 6%, 6%, 8.75%, 10%, 11%.
A. Minimum rate on Series EE U.S. savings bonds held at least five years.
B. New interest rate on delinquent taxes owed to the IRS.
C. New interest rate on overpayments owed to taxpayers by the IRS.
D. Current bank prime rate.
E. Current Federal Reserve discount rate.
16. What major bank made news in 1987 by introducing a certificate of deposit tied to the Standard & Poor’s 500-stock index? (one point)
A. Security Pacific.
B. Chase Manhattan.
C. Citibank.
D. Wells Fargo.
17. The following organizations made news in 1987. Identify them. (one point each, four points total)
A. FSLIC.
B. CFTC.
C. NASD.
D. CBOE.
18. The Treasury Department created an uproar in the eurobond markets last year when it moved to cancel a U.S. tax treaty with what offshore tax haven? (one point)
19. Master limited partnerships were a popular investment vehicle in 1987. Which of the following are characteristics of MLPs? (one point)
A. Shares in MLPs can be bought on stock exchanges.
B. MLP profits are only taxed at the shareholder level.
C. MLPs often are oriented toward real estate or oil and gas.
D. All of the above.
E. None of the above.
20. You participate in a company pension plan. Under tax reform, under what circumstances can you still take at least a partial deduction for a contribution to an individual retirement account? (one point)
A. You can’t deduct anything anymore if you are in a company pension plan.
B. If your adjusted gross income is $25,000 or less if you are single and $40,000 or less if you are married filing jointly.
C. If your adjusted gross income is $35,000 or less if you are single and $50,000 or less if you are married filing jointly.
D. None of the above.
21. Tax reform reduced a number of popular tax breaks. Which of the following items are still fully deductible whether you itemize or not? (one point)
A. Charitable contributions.
B. State sales taxes.
C. Unreimbursed employee business expenses.
D. All of the above.
E. None of the above.
22. Which get-rich-quick real estate guru, who wrote “How You Can Become Financially Independent by Investing in Real Estate,” filed for personal bankruptcy last year? (one point)
23. The changes to the alternative minimum tax under tax reform will cause headaches for many taxpayers this year. Which of the following items, deductible under normal circumstances, must be added back to your taxable income if you fall under the AMT? (one point)
A. State and local income taxes.
B. Real estate and personal property taxes.
C. Tax preparation fees.
D. All of the above.
E. None of the above.
QUIZ ANSWERS
(Total points in parentheses)
1. 508 points; 1,738.74; 22.6% (three)
2. C. (one)
3. C. (one)
4. A. (one)
5. B. (one)
6. E. (one)
7. C. (one)
8. B. (one)
9. B. (one)
10. A. (one)
11. Robert R. Prechter Jr.; The Elliott Wave Theorist (two)
12. A. 2,722.42; B. $497.10 an ounce; C. $9.66 an ounce (three)
13. Irises; $53.9 million (two)
14. Optima (one)
15. 6%--Minimum rate on Series EE U.S. savings bonds held at least five years; 11%--New interest rate on delinquent taxes owed to the IRS; 10%--New interest rate on overpayments owed to taxpayers by the IRS; 8.75%--Bank prime rate; 6%--Federal Reserve discount rate. (five)
16. B. (one)
17. A. Federal Savings and Loan Insurance Corp.; B. Commodity Futures Trading Commission; C. National Assn. of Securities Dealers; D. Chicago Board Options Exchange. (four)
18. Netherlands Antilles (one)
19. D. (one)
20. C. (one)
21. E. (one)
22. Albert J. Lowry (one)
23. D. (one)
