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 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 3

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

Revolt · Accepted Answer

predictability

Question 4

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

Revolt · Accepted Answer

are considered safer.

Question 5

The graph shows the effect of inflation.Approximately how much of the initial investment’s value would be lost after 15 years at 3% inflation?

Revolt · Accepted Answer

40%

Question 6

Changes in monetary policy have the greatest effect on

Revolt · Accepted Answer

demand for investments.

Question 7

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

Revolt · Accepted Answer

The greater the risk, the greater the potential return.

Question 8

Taxes are often owed on

Revolt · Accepted Answer

investment returns.

Question 9

Interest rates generally reflect

Revolt · Accepted Answer

the level of risk in an investment.

Question 10

[BLANK]

Revolt · Accepted Answer

Fiscal

Principles of Investment Answers