Do You Know More Than the Average American About Investing?
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According to the CNBC article "The Average American Scored an ‘F’ on This Investing Quiz — See How You Do," more than half of the 1,000 people surveyed for the financial site Magnifymoney failed to score above a 40% on a 10-question quiz about investing.
Financial advisor Jeff Rose provides the correct answers to the questions from the quiz with explanations for each. The questions from the quiz are:
- Which best describes your understanding of compound interest?
- What is the S&P 500?
- True or false: When you purchase a stock, that means you’re a partial owner of the company.
- What is a dividend?
- How is a company’s share price determined?
- What is the Dow Jones?
- True or false: Novice investors should focus on timing the market to maximize their investments.
- What does it mean when a stock has a high P/E ratio?
- How long do you have to hold a stock for it to be considered a long-term investment for tax purposes?
- Do all stocks pay dividends to investors?