Investment and Risk Assessment

An investor concerned with a predictable source of income provided by an investment would choose:

• U.S. government securities.

• commodities.

• options.

• common stocks.

• speculative investments.

Based on historical performance, which one of the following investments is most likely to provide an average return of 10 percent a year between now and the year 2035?

• U.S. Treasury bills

• Corporate bonds

• Stocks

• Options

• Zero-coupon bonds

An investor purchased a stock they expect will provide them with a quarterly cash payment, although that payment is not guaranteed and can vary over time. What type of payment are they expecting to receive?

• Interest

• Capital gain

• Dividend

• Tax rebate

• Option premium

Which one of these is not an example of systematic risk?

• War

• Inflation

• Political activity

• Decline in the auto industry

• Increasing interest rates

Which of the following is not true of mutual funds?

• Mutual funds range from very conservative to extremely speculative investments.

• They do not offer diversification.

• They can be used for retirement accounts.

• This investment may provide professional management.

• A mutual fund pools the money from many investors.

Many financial planners recommend that you choose a mutual fund with an expense ratio of:

• 1 percent or less

• 2 percent or less

• 3 percent or less

• 4 percent or less

• 5 percent or less

The current market value of a mutual fund’s portfolio minus the mutual fund’s liabilities equals a figure, that when divided by the number of shares outstanding, results in the

• book value

• outstanding balance

• expense ratio

• accounting value

• net asset value

Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy. What type of stock is Kay thinking about adding to her portfolio?

• Defensive stock

• Cyclical stock

• Small cap stock

• Blue chip stock

• Growth stock

• $200

• $1,000

• $1,250

• $1,500

• $2,200

The stock exchange known to trade stock for innovative, forward-looking growth companies is the:

• A) NYSE.

• B) NASDAQ.

• C) American Stock exchange.

• D) S&P 100.

• E) STSE.