I think some people believe the Dow Jones Industrial Average has something to do with stock performance. That's not exactly the case. The Dow is a sales gimmick, a trick that is played on people to steal their money. Take the following quiz to see if you understand the DJIA:
Directions: Please assume nothing changes exept the Dow components in question, then pick the BEST answer. Don't scroll down until you are finished, the answers are listed below.
1.) If Citigroup stock went to $0 tomorrow, the Dow would:
a. Not change2.) Citi stock goes to $0, at the same time IBM announces a new CEO and rises 4%, the Dow:
b. Drop 360 points
c. Drop 180 points
d. Drop 712 points
a. Goes up
b. Goes down
c. Stays the same
3.) GM was replaced by Cisco on June 1, 2009. On June 2, 2009, Cisco needed to climb ___% to equal the effect of GM's stock plunging -50% just a few days prior.
4.) If Microsoft stock goes from $30 to $60 tomorrow, the Dow will climb:
a. 135 points
b. 410 points
c. 40 points
d. 1,200 points
5.) If every Dow component rises $1 tomorrow, the Dow will rise:
a. 240 points
b. 30 points
c. 300 points
d. 90 points
6.) Which relationship is true with respect to making the Dow move:
a. Alcoa + BofA + Citi+ GE + Intel + Kraft + Pfizer = IBM
b. J&J = Kraft
c. Citi + BofA = JP Morgan Chase
d. Caterpillar + Chevon + Disney = Exxon
7.) If a given Dow component falls today:
a. Tomorrow it is weighted less8.) How many of the original Dow components are still part of the Dow?
b. Tomorrow it is weighted more
c. Tomorrow it is weighted the same
9.) 3M is 5 times more important than Pfizer.
10.) If 3M goes from $82 to $83 at the same time Pfizer goes from $17 to $16:
a. The Dow will not changeI added one more question to clarify a comment...
b. The Dow goes up 50 points
c. The Dow goes Down 50 points
11.) If 15 of 30 Dow components go down 1% per day, and the other 15 components go up 1% per day, after 30 days the Dow would (hypothetically assuming all Dow components started out equally weighted, and the index started at 10,800):
a. Go up to 11,240
b. Go down to 10,400
c. Not change
Answer (a) is always correct.