Investment Investment MCQ 4

Question 1

What does a high dividend yield indicate relative to share price?

Accepted Answer

Large dividend per dollar invested

Answer

Dividend yield is the annual dividend divided by share price, so a high yield means more dividend per dollar invested.

Question 2

An ETF differs from a mutual fund mainly because it:

Accepted Answer

Trades on an exchange throughout the day

Answer

ETFs trade on exchanges like stocks throughout the day, unlike mutual funds priced once daily.

Question 3

Capital gains are realized when an investor:

Accepted Answer

Sells an asset for more than its cost

Answer

A capital gain is realized when an asset is sold for more than its purchase price.

Question 4

Inflation erodes the value of investments by:

Accepted Answer

Reducing real returns

Answer

Inflation reduces purchasing power, lowering the real (inflation-adjusted) return on investments.

Question 5

What is the primary goal of a stop-loss order?

Accepted Answer

Limit potential losses on a position

Answer

A stop-loss order automatically sells a security at a set price to limit losses.

Investment Practice Test