Principles of Investment — Quiz

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

What occurs over time as a result of inflation? Choose two correct answers.

Revolt · Accepted Answer

The dollar’s future value changes.; Interest becomes worth less money.

Question 3

Which characteristic is most important in determining an investment’s level of risk?

Revolt · Accepted Answer

predictability

Question 4

Why should investors know the difference between nominal and real interest rates?

Revolt · Accepted Answer

to recognize the effects of inflation

Question 5

An investment with a stable and predictable history will most likely have

Revolt · Accepted Answer

low risk.

Question 6

Why should investors know the difference between nominal and real interest rates?

Revolt · Accepted Answer

to recognize the effects of inflation

Question 7

Which characteristic is most important in determining an investment’s level of risk?

Revolt · Accepted Answer

predictability

Question 8

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 point 7 5 percent

Question 9

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

Revolt · Accepted Answer

are considered safer.

Question 10

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

Revolt · Accepted Answer

The greater the risk, the greater the potential return.

Principles of Investment — Quiz Answers