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1.
The Russell 2000 index tracks the 2000 largest American stocks.
False. The Russell 2000 actually tracks the 1,001st to 3,000th largest U.S. stocks--in other words, the bottom 2,000 stocks in the Russell 3000 index.
2.
Which statement is true?
Index funds in the large-cap blend category can follow different indexes. Not all index funds are cheap--not even all large-blend index funds. Index funds in the large-blend category can follow different indexes--the most common of which is the SP 500.
3.
Which statement is false?
Index funds are all cheap. Given that index-fund managers aren't actively researching and selecting stocks, all index funds ought to be cheap.
4.
Because index funds are passively managed, we can expect their annual expenses to be very low.
False. Though we should expect that, we unfortunately cannot, as some funds still charge high annual expenses.
5.
Which of the following types of index funds is typically the least tax efficient?
Small-cap index fund. The small-cap funds eventually have to sell stocks that have grown too large for their indexes, and this creates taxable capital gains.
