Introduction to Investment

Employment of funds with the aim of achieving additional income is known as____

• Investment

• Speculation

• Gambling

• Biting

____________ is based on tips, rumours and hunches, unplanned and without knowledge of the exact nature of risk.

• Investment

• Speculation

• Gambling

• Arbitrage

Buying low and selling high, making a large capital gain is associated with ________

• Investment

• Speculation

• Gambling

• Arbitrage

An investment is the current commitment of dollars over time to derive future payments to compensate the investor for the time funds are committed, the expected rate of inflation and the uncertainty of future payments.

• True

• False

As the level of risk increases an investor will require an expected return that will compensate for this additional risk.

• True

• False

The sources of investment returns are dividend and interest

• True

• False

Diversification is the inclusion of a number of different investment vehicles in a portfolio with the goal of increasing returns or reducing risk

• True

• False

An investor should expect to receive higher returns from taking a lower risk

• True

• False

Generally speaking, the investment process includes 6 components

• True

• False

Financial constraint, physiological constraint and management constraint are the reasons why the individual does not invest.

• True

• False