About Investment

Following are some of the multiple choice questions on the Investment with answers that will help the students in developing their knowledge.

Investment MCQ

1. The chart used to show the value of a $1 through various investments and timeframes is called:

  • Skittles Chart
  • Venn Diagram
  • Investment/Inflation Chart
  • The Ibbotson Chart

2. If a company files for bankruptcy, which of the following securities is most at risk of becoming virtually worthless

  • preferred stock
  • common stock
  • bond

3. Buying and Selling StocksRandy just bought 800 shares of stock in Facebook at $19.50 per share. A stock company that you have been working with charges $10 per transaction and you want to sell because the current rate for your shares skyrocketed and is at $34.50 per share. How much did Randy buy from Facebook?

  • 800∗$34.50=$27,600.00
  • 800∗$19.50=$15,600.00
  • $27,600−$15,600=$12,000.00
  • $12,000.00−$20.00=$11,980.00

4. An investment program funded by shareholders that trades in diversified

  • Mutual Funds
  • Dividends
  • Share program
  • None of the answers

5. An amount of money paid by a company regularly to it's shareholders

  • Profit
  • Bonds
  • Dividends
  • Cash back

6. The owner of a companies shares.

  • Businessman
  • Bond master
  • Broker
  • Shareholder

7. A part into which a companies capital is divided, entitling the shareholder to a portion of the profits.

  • Dividend
  • Bond
  • Share
  • Stock

8. A type of savings that signifies that you own a part of a corporation and a claim to their assets and earnings.

  • Stock
  • Share
  • Dividend
  • none is correct

9. Price paid at the purchase of bonds

  • Face Value
  • Selling Price
  • Cost Price
  • Bond Price

10. Money borrowed for a project where their price is a function of the law of supply and demand. People who buy these ______ are lending money for a project.

  • Share
  • Mutual funds
  • Bonds
  • Capital

11. High interest rates will

  • shift the flow supply schedule for new housing to the right
  • shift the flow supply schedule for new homes to the left.
  • shift the demand schedule for new housing to the right.
  • have no effect on the cost of new housing, only on existing homes.

12. Business fixed investment

  • is only a minor component of total aggregate demand.
  • does not play an important role in the process of longer-run economic growth.
  • averages roughly 11 percent of GDP.
  • has declined every year since 1993 as a percentage of total output.

13. Inventory investment includes spending on

  • a. capital equipment minus depreciation.
  • b. goods firms sell to other firms.
  • c. the purchase of materials and supplies used in production.
  • d. goods in production
  • e. both c and d.

14. The flexible accelerator model of investment can be shown as

  • In, t = λ(αYt – Kt – 1).
  • In, t = λ(αYt – Kt + 1).
  • In, t = λ(αYt + Kt– 1).
  • In, t = λ(αYt + Kt+ 1).
  • None of above

15. Which of the following would increase the cost of capital to the firm (holding constant the other elements of the cost of capital)?

  • A fall in the expected inflation rate
  • A fall in the depreciation rate
  • A fall in the nominal interest rate
  • A rise in the investment tax credit

16. If the life cycle theory of consumption holds, as the fraction of our population that is retired rises over the next 20 years, the national savings rate should

  • rise and interest rates should rise.
  • fall and interest rates should fall.
  • fall and interest rates should rise.
  • rise and interest rates should fall.
  • none of the above

17. The largest component of investment is

  • capital investment.
  • inventory investment.
  • business fixed investment.
  • residential construction.

18. Which of the following statements is (are) correct?

  • a. The simple accelerator theory combined with the multiplier process provides an explanation of cyclical fluctuations in output
  • b. Investment is more volatile than the simple accelerator model predicts
  • c. According to the simple accelerator theory of investment, the level of investment is dependent on the level of existing inventories
  • Both a and b
  • All of the above

19. If the mortgage rate is 4 percent and the expected inflation rate is 6 percent, then the real borrowing cost would be

  • 2 percent
  • -2 percent
  • 4 percent
  • 10 percent

20. If a firm faces financing constraints on its investment spending, the most important determinant of how much it invests will be the

  • firm's current profitability.
  • the firm's future profitability.
  • the nominal interest rate.
  • the real interest rate.
  • the firms cost of capital.

21. In the accelerator model of investment, when there is no change in output then investment is

  • zero
  • positive
  • negative
  • one

22. Keynesians argue that investment is the most volatile component of GDP because of

  • a. volatile changes in permanent income.
  • b. volatile expectations.
  • c. volatile changes in current income.
  • d. volatile changes in productivity.
  • all of above

23. Investment in the national income accounts includes which of the following?

  • a. Purchases of durable equipment and structures
  • b. Residential construction expenditures
  • c. Changes automobile sales
  • d. Both a and b
  • e. All of the above

24. A raw material or primary agricultural product that can be bought and sold, such as copper or coffee

  • CD
  • Dividend
  • Commodity
  • Bond

25. Degree of uncertainty on how likely the investor is to make money on an investment

  • Index
  • Risk
  • Maturity
  • Penalty

26. There are no consequences for withdrawing money from a CD before the maturity date

  • True
  • False

27. A certificate issued by a bank to a person depositing money for a specified length of time.

  • Mutual Fund
  • Index
  • Bond
  • Certificate of Deposit (CD)

28. A sudden and extreme downturn in stock performance/value

  • Index
  • Crash
  • Penalty
  • Risk

29. A fee you’ll be charged for withdrawing money before a CD’s maturity date

  • Index
  • Interest
  • Risk
  • Penalty

30. The time period an investment is intended to last

  • Maturity Date
  • Term
  • Interest
  • Diversification

31. A market where shares in corporations are bought and sold through an organized system.

  • Portfolio
  • Index
  • Stock Market
  • CD

32. A share of the value of a company, which can be bought, sold or traded as an investment and which gives the investor partial ownership of the company

  • CD
  • Mutual Fund
  • T-Note
  • Stock

33. A collection of stocks and/or bonds combined into one fund, which will be traded as a unit, typically chosen and actively managed by an expert in exchange for a fee from each investor.

  • Stock
  • Bond
  • T-Note
  • Mutual Fund

34. A bond, generally considered to be a risk-free investment, issued by the U.S. Treasury, with a maturity of more than 10 years.

  • T-Note
  • Mutual Fund
  • Emergency Fund
  • CD

35. A bond, often having tax advantages for individual investors, issued by a state or local government, typically uses the loan to pay for public works to benefit its citizens.

  • Index Fund
  • Commodity
  • Municipal Bond
  • Emergency Fund

36. Semiannually means

  • Once a year
  • Every other year
  • Twice a year
  • Four times a year

37. The act of investing in a large variety of stocks, bonds and/or alternative investments, like gold or real estate, as a way to reduce your overall risk.

  • Dividends
  • Mutual Fund Investing
  • Portfolio
  • Diversification

38. The overall collection of investments held by a person.

  • Fund
  • Portfolio
  • Savings Account
  • Certificate of Deposit

39. A security in which the investor loans money to a company or government, then pays regular interest to the bondholder and returns the principal on the bond’s maturity date

  • Index Fund
  • Dividend
  • Bond
  • T-Note

40. A payment made by a publicly traded corporation to its shareholders

  • Dividend
  • Index
  • Commodity
  • T-Note

41. A mutual fund that invests in the stocks that are the basis of a well-known stock or bond index

  • T-Note
  • CD
  • Index Fund
  • Commodity

42. Money set aside for unanticipated expenses or loss of income

  • Mutual Fund
  • T-Note
  • Index Fund
  • Emergency Fund

43. The amount you earn as profit from your investment based on your deposited amount, usually expressed as a percentage

  • Penalty
  • Interest Rate
  • Emergency Fund
  • Index

44. The bridge between investors and borrowers is called

  • Market
  • Electronic market
  • Financial market
  • None of these

45. Gambling and investment are same thing.

  • False
  • True
  • Partly true
  • None of these

46. Financial market is a part of security market

  • True
  • False
  • None of these

47. Shares investment are the component of

  • Securities market
  • Banking system
  • Insurance market
  • Financial market

48. Exchanging one currency with another is a part of

  • Commodity market
  • Securities market
  • Forex market
  • None of these

49. Inflation can be managed with the help of

  • Savings
  • Investment
  • Consumption
  • None of these

50. The two broad category of investment alternatives are

  • Shares and debentures
  • Bank and post office deposit
  • Financial assets & Real Assets
  • None of these

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