Investment Principles of Investment 3

Question 1

What is liquidity in the context of investing?

Accepted Answer

How quickly an asset can be converted to cash without large loss

Answer

The total value of assets

Answer

The interest rate earned

Answer

The amount of debt held

Question 2

Which investment vehicle pools money from many investors to buy a diversified basket of securities?

Accepted Answer

Mutual fund

Answer

Single stock

Answer

Savings account

Answer

Treasury bond

Question 3

What does a dividend represent?

Accepted Answer

A distribution of company profits to shareholders

Answer

A loan repayment

Answer

A capital gain

Answer

A management fee

Question 4

Asset allocation refers to:

Accepted Answer

Dividing investments among asset categories

Answer

Picking individual winning stocks

Answer

Timing the market

Answer

Avoiding all bonds

Question 5

A higher expected return is generally associated with:

Accepted Answer

Higher risk

Answer

Lower risk

Answer

No risk

Answer

Guaranteed principal

Question 6

What is an index fund designed to do?

Accepted Answer

Track the performance of a market index

Answer

Beat the market through active picks

Answer

Invest only in bonds

Answer

Guarantee a fixed return

Question 7

Inflation erodes the value of investments by reducing:

Accepted Answer

Purchasing power

Answer

Nominal returns

Answer

Tax rates

Answer

Trading volume