Question 1

An investment that can be sold quickly but only by making price concessions suffers from ____ risk.

Accepted Answer

A) liquidity 
B) marketability 
C) financial 
D) market volatility 
A) liquidity 
B) marketability 
C) financial 
D) market volatility B

Question 2

Market risk is also known as

Accepted Answer

A) unsystematic risk. 
B) diversifiable risk. 
C) systematic risk. 
D) random risk. 
A) unsystematic risk. 
B) diversifiable risk. 
C) systematic risk. 
D) random risk. C

Question 3

A stock

Accepted Answer

A) represents a share of ownership in a corporation. 
B) represents a debt owed by a business or organization. 
C) is a portfolio. 
D) an example of leverage. 
A) represents a share of ownership in a corporation. 
B) represents a debt owed by a business or organization. 
C) is a portfolio. 
D) an example of leverage. A

Question 4

Having an investment approach that focuses on preservation of capital means that you do not want to lose any of the money you have invested.

Accepted Answer

A) True 
 B)False

Question 5

Of the following investment alternatives,which is highest on the investment pyramid?

Accepted Answer

A) Growth stocks 
B) Municipal bonds 
C) Collectibles 
D) Aggressive-growth mutual funds 
A) Growth stocks 
B) Municipal bonds 
C) Collectibles 
D) Aggressive-growth mutual funds

Question 6

If your time horizon is six to ten years and your asset allocation consists of 10 percent cash,30 percent bonds,and 60 percent stocks,you would be considered to have a(n) ____ investment philosophy.

Accepted Answer

A) aggressive 
B) moderate 
C) conservative 
D) ultraconservative 
A) aggressive 
B) moderate 
C) conservative 
D) ultraconservative

Question 7

Ownership investments are more vulnerable to deflation risk than lending investments.

Accepted Answer

A) True 
 B)False

Question 8

Generally,older investors should have a larger proportion of their assets in bonds than younger investors.

Accepted Answer

A) True 
 B)False

Question 9

The real rate of return on an investment is the yield minus the effect of taxes only.

Accepted Answer

A) True 
 B)False

Question 10

The basis for the buy-and-hold philosophy is that investments go up over time and it is best to think long-term after selecting well positioned investments.

Accepted Answer

A) True 
 B)False

Question 11

Diversification reduces all risk.

Accepted Answer

A) True 
 B)False

Question 12

Which investment would not be an appropriate choice for a conservative investor?

Accepted Answer

A) Aggressive-growth stocks 
B) Treasury bills 
C) Municipal bonds 
D) High-quality corporate bonds 
A) Aggressive-growth stocks 
B) Treasury bills 
C) Municipal bonds 
D) High-quality corporate bonds

Question 13

_________ has to do with the speed with which new information is reflected in the market prices for investments.

Accepted Answer

A) Leverage 
B) Modern portfolio theory 
C) Dollar-cost averaging 
D) Market efficiency 
A) Leverage 
B) Modern portfolio theory 
C) Dollar-cost averaging 
D) Market efficiency

Question 14

____ risk exists in situations that offer potential for gain as well as for loss.

Accepted Answer

A) Systematic 
B) Pure 
C) Market 
D) Speculative 
A) Systematic 
B) Pure 
C) Market 
D) Speculative

Question 15

The real rate of return on a tax-free investment yielding 7 percent annually would be ____ percent if the investor were in the 35 percent marginal tax bracket and inflation were 4 percent.

Accepted Answer

A) -0.55 percent 
B) 0.55 percent 
C) 3.00 percent 
D) 4.48 percent 
A) -0.55 percent 
B) 0.55 percent 
C) 3.00 percent 
D) 4.48 percent

Question 16

Historically,both common stock and corporate bonds have performed well in times of inflation.

Accepted Answer

A) True 
 B)False

Question 17

____ risk is the risk that the value of an investment will decline when overall prices decline.

Accepted Answer

A) Inflation 
B) Deflation 
C) Interest rate 
D) Financial 
A) Inflation 
B) Deflation 
C) Interest rate 
D) Financial

Question 18

Most investors nearing retirement are aggressive in investment philosophy.

Accepted Answer

A) True 
 B)False

Question 19

Financial risk relates to the possibility that the investment will fail to pay a return to the investor.

Accepted Answer

A) True 
 B)False

Question 20

A conservative investor would be least likely to invest in

Accepted Answer

A) blue-chip corporate stock. 
B) high-quality corporate bonds. 
C) balanced mutual funds. 
D) growth mutual funds. 
A) blue-chip corporate stock. 
B) high-quality corporate bonds. 
C) balanced mutual funds. 
D) growth mutual funds.

An investment that can be sold quickly but only by making price concessions suffers from ____ risk.

Market risk is also known as

A stock

Having an investment approach that focuses on preservation of capital means that you do not want to lose any of the money you have invested.

Of the following investment alternatives,which is highest on the investment pyramid?

If your time horizon is six to ten years and your asset allocation consists of 10 percent cash,30 percent bonds,and 60 percent stocks,you would be considered to have a(n) ____ investment philosophy.

Ownership investments are more vulnerable to deflation risk than lending investments.

Generally,older investors should have a larger proportion of their assets in bonds than younger investors.

The real rate of return on an investment is the yield minus the effect of taxes only.

The basis for the buy-and-hold philosophy is that investments go up over time and it is best to think long-term after selecting well positioned investments.

Diversification reduces all risk.

Which investment would not be an appropriate choice for a conservative investor?

_________ has to do with the speed with which new information is reflected in the market prices for investments.

____ risk exists in situations that offer potential for gain as well as for loss.

The real rate of return on a tax-free investment yielding 7 percent annually would be ____ percent if the investor were in the 35 percent marginal tax bracket and inflation were 4 percent.

Historically,both common stock and corporate bonds have performed well in times of inflation.

____ risk is the risk that the value of an investment will decline when overall prices decline.

Most investors nearing retirement are aggressive in investment philosophy.

Financial risk relates to the possibility that the investment will fail to pay a return to the investor.

A conservative investor would be least likely to invest in

Understanding Personal Finance

Career Planning

Financial Statements,tools,and Budgets

Managing Income Taxes

Managing Checking and Savings Accounts

Building and Maintaining Good Credit

Credit Cards and Consumer Loans

Vehicles and Other Major Purchases

Obtaining Affordable Housing

Managing Property and Liability Risk

Managing Health Expenses

Life Insurance Planning

Investing in Stocks and Bonds

Mutual Funds and Exchange Traded Funds

Real Estate and High-Risk Investments

Retirement and Estate Planning

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Exam 13: Investment Fundamentals

An investment that can be sold quickly but only by making price concessions suffers from ____ risk.

Market risk is also known as

A stock

Having an investment approach that focuses on preservation of capital means that you do not want to lose any of the money you have invested.

Of the following investment alternatives,which is highest on the investment pyramid?

If your time horizon is six to ten years and your asset allocation consists of 10 percent cash,30 percent bonds,and 60 percent stocks,you would be considered to have a(n) ____ investment philosophy.

Ownership investments are more vulnerable to deflation risk than lending investments.

Generally,older investors should have a larger proportion of their assets in bonds than younger investors.

The real rate of return on an investment is the yield minus the effect of taxes only.

The basis for the buy-and-hold philosophy is that investments go up over time and it is best to think long-term after selecting well positioned investments.

Diversification reduces all risk.

Which investment would not be an appropriate choice for a conservative investor?

_________ has to do with the speed with which new information is reflected in the market prices for investments.

____ risk exists in situations that offer potential for gain as well as for loss.

The real rate of return on a tax-free investment yielding 7 percent annually would be ____ percent if the investor were in the 35 percent marginal tax bracket and inflation were 4 percent.

Historically,both common stock and corporate bonds have performed well in times of inflation.

____ risk is the risk that the value of an investment will decline when overall prices decline.

Most investors nearing retirement are aggressive in investment philosophy.

Financial risk relates to the possibility that the investment will fail to pay a return to the investor.

A conservative investor would be least likely to invest in

Understanding Personal Finance

Career Planning

Financial Statements,tools,and Budgets

Managing Income Taxes

Managing Checking and Savings Accounts

Building and Maintaining Good Credit

Credit Cards and Consumer Loans

Vehicles and Other Major Purchases

Obtaining Affordable Housing

Managing Property and Liability Risk

Managing Health Expenses

Life Insurance Planning

Investing in Stocks and Bonds

Mutual Funds and Exchange Traded Funds

Real Estate and High-Risk Investments

Retirement and Estate Planning

Filters