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Exam 13: Investing Fundamentals

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Question 61

Multiple Choice

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Which of the following is a true statement?

A) To be useful, investment goals must be written.
B) To be useful, investment goals must be very general.
C) Investment goals are the same for each individual.
D) Because investment goals deal with the future, it is useless to plan more than five years in the future.
E) A long-term investment goal involves a time period of five years or less.

F) A) and E)
G) A) and D)

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Question 62

Multiple Choice

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An example of ____________ risk occurs when the financial return on an investment does not keep up with prices that are increasing in the overall economy.

A) market
B) interest
C) inflation
D) business failure
E) current

F) D) and E)
G) B) and D)

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Question 63

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A change in the value of stocks,bonds,or other investments due to political activity may cause investors to experience ____________ risk.

Equity capital is money:

Liquidity is the ability to buy or sell an investment quickly without substantially affecting the investment's value.

The first step to creating an investment plan is to establish investment goals.

Because of the age factor,older investors tend to be more conservative and invest in:

Terry Hamilton has just received $30,000 from an uncle who died and is trying to decide how to invest it.She has done some research and has decided that about 30% of the money should go into large cap stocks,20% into medium cap stocks,15% into small cap stocks,10% into bonds,10% into foreign stock,and 15% into cash.She thinks that even if one area does not do that well,the rest will so that her overall return will be pretty good.What aspect of investing is Terry most concerned about?

During periods of high inflation,there is a risk that the financial return on an investment will not keep pace with the rate of inflation.

For a corporation,equity capital is provided by:

Mike Lively is thinking about buying an investment that represents an ownership claim on a company.The most important priority he has with this investment is receiving his dividends before dividends are paid on other types of investments.What investment is Mike thinking about purchasing?

Accurate record keeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.

Which of the following is not true of stocks?

What percentage of your assets should be invested in safer,more conservative investments according to many financial planners if you are 30 years of age?

Which of the following features does not accurately describe a line of credit?

Brokerage firms,investment companies,banks,and most corporations have a home page where you can obtain valuable investment information.

The potential return on any investment should be directly related to the risk that the investor assumes.

To avoid the financial problems associated with excessive credit card debt,you should:

Twenty years ago,you began investing $250 a month.Because your investments earned an average of 8 percent a year,your investment portfolio has a current dollar value of $145,000.How much did you earn on your investments over the 20-year period of time?

An investor concerned with a predictable source of income provided by an investment would choose: