Principles of Investment Flashcards
7 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Principles of Investment flashcards as text
What is the main characteristic of a bond?
Answer: A loan to an issuer that pays interest
A bond is a debt instrument where the investor lends money in exchange for interest payments.
Which factor most increases the future value of an investment over time?
Answer: Longer compounding period
A longer compounding period dramatically increases future value due to exponential growth.
Systematic risk is also known as:
Answer: Market risk
Systematic risk, or market risk, affects the entire market and cannot be diversified away.
What is dividend yield?
Answer: Annual dividend divided by share price
Dividend yield is the annual dividend per share divided by the current share price, shown as a percentage.
A 'bear market' is generally defined as a decline of at least:
Answer: 20%
A bear market is typically defined as a 20% or greater decline from recent highs.
What is the benefit of tax-deferred accounts like a traditional 401(k)?
Answer: Contributions reduce current taxable income
Traditional 401(k) contributions are pre-tax, lowering current taxable income while growth is tax-deferred.
Which principle suggests not putting all your investment money into a single asset?
Answer: Diversification
Diversification spreads investments to avoid overexposure to any single asset or risk.