Deck 1: An Introduction to Investmentsprivate

Question 1

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

Answer 1

D

Question 2

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

Answer 2

False

Question 3

The investor should specify the objectives of investing.

Answer 3

True

Question 4

Portfolio assessment should include measures of both risk and return.

Question 5

Investments are made in anticipation of a return.

Question 6

An informed investor can expect to consistently outperform the market.

Question 7

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

Question 8

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

Question 9

Trading implies

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

Question 10

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 11

The anticipated return and the realized return often differ.

Question 12

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

Question 13

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

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

Question 14

Diversification reduces

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

Question 15

Efficient markets suggests that investors will outperform the market consistently.

Question 16

Reasons for saving and investing include
1) need for funds to meet emergencies
2) retirement income
3) 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 17

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

Question 18

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

Question 19

Many investments such as stock have common
Characteristics including
1) existence of secondary markets
2) risk
3) potential for capital gains

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

Question 20

Which of the following is an investment as defined
By an economist?

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