Training test for current control 5

What is the risk-return tradeoff?

• It is the relationship between risk and return, in which investments with more risk should provide higher returns, and vice versa
• A strategy to balance risk and returns by investing in different asset classes
• Measures directed at diluting or dismantling regulatory control over the institutional structures, instruments
• An entity that acts as the middleman between two parties in a financial transaction

Give examples for market risk

• Stock market decline on bad news, political upheaval, changes in economic conditions
• Decline in company profits or market share, bad management decisions
• Company can't get additional loans for growth or to fund operations
• Market values of existing bonds decrease as market interest rates increase

What is the realized return?

• Realized return is a current return actually received by an investor during the given return period
• Realized return occurs when the value of an asset has increased or decreased, but it has not yet been sold
• Realized return is a measure of a company's financial performance that shows the relationship between a company's profit and the investor's return
• Realized return measures how much net income or profit is generated as a percentage of revenue

What is business risk?

• Business risk is the degree of uncertainty associated with an investment's earnings and the investment's ability to pay the returns owed to investors
• Business risk is the period of time over which an investor wishes to measure the return on an investment vehicle
• Business risk is current risk actually received by an investor during the given return period
• Business risk is the chance that the actual return from an investment may differ from what is expected

What is a type of debt or long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest per year and the face value of the bond at maturity?

• Bond
• Loan
• Share
• Stock

Which bond is secured by a lien on real property?

• Mortgage bond
• Eurobond
• Convertible bond
• Callable bond

What is a special type of bond that can be exchanged into some more junior grade of securities (usually into common stock)?

• A convertible bond
• A Eurobond
• A callable bond
• A mortgage bond

Who issues Treasury bonds in the USA?

• The federal government
• State and local governments
• Corporations
• Foreign governments and foreign corporations

Who issues municipal bonds in the USA?

• State and local governments only
• The federal government only
• Corporations only
• Foreign governments and foreign corporations only

What is the process of diversifying an investment portfolio across various asset categories, like stocks and bonds and cash to balance the risk/reward tradeoff?

• Asset allocation
• Bond allocation
• Stock allocation
• Cash allocation