3.5 Principles of Investment

Question 1

Which statement best describes how inflation affects the value of investments over time?

Revolt · Accepted Answer

It decreases the value of money.

Question 2

If the Federal Reserve decreased the money supply, what would the effects be? Check all that apply.

Question 3

Interest rates generally reflect

Revolt · Accepted Answer

the level of risk in an investment.

Question 4

If an investor has a $5,000 pretax return, the state tax rate is 4.5%, and the federal tax rate is 22.0%, what is the real investment value?

Revolt · Accepted Answer

$3,675

Question 5

Compared to high-risk investments, low- and medium-risk investments are in higher demand because they

Revolt · Accepted Answer

are considered safer.

Question 6

Which statement is true of the relationship between risk and return?

Revolt · Accepted Answer

The greater the risk, the greater the potential return.

Question 7

[BLANK]

Revolt · Accepted Answer

Fiscal

Question 8

Taxes are often owed on

Revolt · Accepted Answer

investment returns.

Question 9

If the nominal interest rate is 4.00% and the rate of inflation is 2.25%, what is the real interest rate?

Revolt · Accepted Answer

1.75%

Question 10

What occurs over time as a result of inflation? Check all that apply.

3.5 Principles of Investment Answers