Principles of Investment Answers
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What occurs over time as a result of inflation? Check all that apply.
A
Interest becomes worth less money.B
The dollar’s value becomes unstable.C
Interest rates decrease.D
Interest rates fluctuate in value.E
The dollar’s future value changes.2
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An investment with a stable and predictable history will most likely have
A
no risk.B
low risk.C
medium risk.D
high risk.3
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?
A
15%B
20%C
40%D
50%4
Interest rates generally reflect
A
the potential effects of inflation.B
the level of risk in an investment.C
the real value of the investment.D
the amount of money invested.5
Why should investors know the difference between nominal and real interest rates?
A
to know what they are likely to loseB
to understand changes in monetary policyC
to guarantee an investment’s profitabilityD
to recognize the effects of inflation6
Changes in monetary policy have the greatest effect on
A
income tax rates.B
service fees and expenses.C
demand for investments.D
government spending.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.Did you find these answers helpful?
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