Deck 1: An Introduction to Investments Private

Question 1

Trading implies

A) frequently buying securities
B) frequently selling securities
C) frequently buying and selling securities
D) investing

Answer 1

C

Question 2

The terms "investing" and "trading" refer to purchasing and selling securities.

Answer 2

True

Question 3

Liquidity refers to the ease of selling a stock for a capital gain.

Answer 3

False

Question 4

Efficient markets suggests that investors will outperform the market consistently.

Question 5

Risk

A) depends solely on price fluctuations
B) should be maximized to increase returns
C) is reduced through specialization
D) refers to the uncertainty of returns

Question 6

Diversification reduces

A) income
B) capital gains
C) taxes
D) risk

Question 7

Financial investments are made in efficient markets.The existence of these markets suggests that

A) investors cannot earn superior returns
B) investors cannot expect to outperform the market consistently
C) securies prices are random
D) bearing additional risk will not increase return

Question 8

The anticipated return and the realized return often differ.

Question 9

Reasons for saving and investing include1. need for funds to meet emergencies2. retirement income3. desire to leave an estate for children

A) 1 and 2
B) 1 and 3
C) 2 and 3
D) all of the above

Question 10

The investor should specify the objectives of investing.

Question 11

CFA is a professional designation for individuals seeking positions as portfolio managers.

Question 12

Capital gains are the sole source of the return on an investment.

Question 13

Which of the following is not an investment in thelayperson's general use of the term

A) equipment
B) land
C) stock
D) savings account

Question 14

Which of the following is an investment as definedby an economist

A) equipment
B) land
C) stock
D) savings account

Question 15

Investments are made in anticipation of a return.

Question 16

Portfolio assessment should include measures of both risk and return.

Question 17

An informed investor can expect to consistently outperform the market.

Question 18

Stocks are initially sold in the "primary" market and subsequently traded in the "secondary" market.

Question 19

Risk is the uncertainty that the realized return may differ from the expected.

Question 20

Many investments such as stock have commoncharacteristics including1. existence of secondary markets2. risk3. potential for capital gains

A) 1 and 2
B) 1 and 3
C) 2 and 3
D) all of the above