Principles of Investment Answers

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1
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Which statement is true of the relationship between risk and return?

A
The greater the risk, the greater the potential return.
B
The relationship between risk and return is always the same.
C
The greater the risk, the lower the potential return.
D
The relationship depends on the individual investment.
2
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Which statement best describes how inflation affects the value of investments over time?

A
It erases the value of investments.
B
It increases the value of money.
C
It decreases the value of money.
D
It controls the value of investments.
3

Taxes are often owed on

A
initial investments.
B
the current value of investments.
C
the real value of investments.
D
investment returns.
6

actualfutureinflatedstated

A
actual
B
future
C
inflated
D
stated
7

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

A
are always affordable.
B
last only a short time.
C
are considered safer.
D
guarantee a profit.
8

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

A
decreased interest rates
B
increased interest rates
C
decreased borrowing
D
increased borrowing
E
decreased investing
F
increased investing
10

[BLANK]

A
Budgetary
B
Fiscal
C
Inflation
D
Monetary

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