Investment Principles of Investment 5

Question 1

What is the main characteristic of a bond?

Accepted Answer

A loan to an issuer that pays interest

Answer

A bond is a debt instrument where the investor lends money in exchange for interest payments.

Question 2

Which factor most increases the future value of an investment over time?

Accepted Answer

Longer compounding period

Answer

A longer compounding period dramatically increases future value due to exponential growth.

Question 3

Systematic risk is also known as:

Accepted Answer

Market risk

Answer

Systematic risk, or market risk, affects the entire market and cannot be diversified away.

Question 4

What is dividend yield?

Accepted Answer

Annual dividend divided by share price

Answer

Dividend yield is the annual dividend per share divided by the current share price, shown as a percentage.

Question 5

A 'bear market' is generally defined as a decline of at least:

Accepted Answer

20%

Answer

A bear market is typically defined as a 20% or greater decline from recent highs.

Investment Practice Test