FIV10104 - Quiz 1

What is an investment?

• A current commitment of money for future benefits.

• The state or quality of being dedicated to a cause.

• A sum of money that is owed or due.

• The management of large amounts of money.

What are some of the examples for financial plan preliminaries?

• Life insurance, car, and house

• Emergency funds, life insurance, and groceries

• Life insurance, non-life insurance, and emergency funds

• Debt, health insurance, and lifestyle

There are four decisions of investment strategy. The two most important strategies are:

• Allocation ranges allowed based on policy weights, and asset classes to consider.

• Asset classes to consider, and policy weights to assign to each eligible class.

• Specific securities to purchase, and policy weights to assign to each eligible class.

• Policy weights to assign to each eligible class, and allocation ranges allowed.

A market with a large number of buyers and sellers, such that no single buyer or seller is able to influence the price or control any other aspect of the market. Which market suits this statement?

• Efficient Market

• Financial Market

• Capital Market

• Competitive Market

Risk refers to:

• Impossible

• Uncertainty

• Losses

• Expectation

A group of securities that have similar characteristics, attributes, and risk/return relationships. The statement refers to:

• Asset Allocation

• Asset Summary

• Asset Class

• Portfolio

Which of the below explains index portfolio construction techniques?

• Buys a representative sample of stocks in the benchmark index according to their weights in the index.

• Higher risk-taking to increase needed performance and beat the benchmark index.

• Emphasizes the selection of securities without any initial market or sector analysis.

• Form a portfolio of equities that can be purchased at a substantial discount to what his or her valuation model indicates they are worth.

Generally, which of the answers define the two types of investors in the market?

• Financial institutions and retail investors

• Speculators and hedgers

• Banks and brokers

• Individual and institutional investors

An efficient market is:

• A market that reacts to information available

• A market structure where competition is at the highest possible level

• A market that is not bias based on relevant information

• A market that investors can predict and have an advantage using private information

Three Components of Required Return are:

• Standard deviation, variance and nominal rate of return

• Risk, inflation and compensation

• Time value of money, expected rate of inflation, and risk

• Nominal rate of return, real rate of return and risk