About Investment

An investment is an item or thing acquired with the purpose of generating income or appreciation. It is called "appreciation" when an asset's worth rises in the future. When someone buys something as an investment, the goal isn't to consume it right away but to utilize it to build wealth in the future.

Investment is usually an outflow of some capital today— time, effort, money, or an asset— with expectations of a bigger return in the future than what was initially put in. For instance, an investor could buy a monetary asset today with the asset that it would generate income in the future or that it will be sold at a better price later for a profit.

Characteristics of Investment

  • The act of putting capital to work in the present with the intention of boosting that money's worth in the future is known as investing.
  • Investing is the act of putting money, time, or effort to use with the hopes of reaping a greater return in the future.
  • An investment is any medium or technique that is employed for the purpose of creating future income. Some examples of investments include bonds, equities, real estate property, and businesses, amongst other possibilities.

Investments that can be made by an Individual

For the ordinary individual, investing in stocks, bonds, and CDs is uncomplicated. If you own stock in a company, you are entitled to a portion of the firm's future income, as well as the opportunity to vote on how the company is run based on the number of shares you own. Bonds and CDs are debt investments in which the borrower invests money in a project that is projected to generate more cash flow than the interest owing to the investors.

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
  • None of these

3. Which of the following has the highest level of risk?

  • savings accounts
  • state treasury savings bond
  • corporate stocks
  • credit union savings accounts

4. Which is the most liquid form of savings?

  • a savings account
  • an IRA
  • a money market account
  • a certificate of deposit

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

  • CD
  • Dividend
  • Commodity
  • Bond

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

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

7. Which statement describes SIMPLE interest?

  • The same amount of interest every time
  • Interest on interest
  • The amount of interest goes up every time
  • none of the above

8. Which is better for you when you are investing money?

  • Compound interest
  • Simple interest

9. 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

10. Which of the following is not traded in Bursa Malaysia?

  • Commercial Paper
  • Shares
  • Foreign Exchange Traded Fund (ETF)
  • Real Estate

11. What is investing?

  • A short-term commitment to meet unexpected shortfalls. Helps meet short-term goals.
  • A long-term approach to watch your money grow. Helps you meet long-term goals.

12. When the company makes a profit it gives the shareholders a

  • Tax
  • Dividend

13. Which of the following is the reason of why company goes public?

  • Audited account
  • Strict regulation
  • Boosting confidence
  • None of the above

14. How many methods of raising capital in secondary market?

  • 1
  • 0
  • 2
  • 3

15. Which of the following is the securities market in Malaysia?

  • Securities Comission
  • Bank Negara Malaysia
  • Bursa Malaysia
  • none of the above

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

  • Index
  • Crash
  • Penalty
  • Risk

17. Shares investment are the component of

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

18. 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

19. The two broad category of investment alternatives are

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

20. The time period an investment is intended to last

  • Maturity Date
  • Term
  • Interest
  • Diversification

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

  • Dividend
  • Index
  • Commodity
  • T-Note

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

  • Fund
  • Portfolio
  • Savings Account
  • Certificate of Deposit

23. 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

24. 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

25. Price paid at the purchase of bonds

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

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

  • Dividend
  • Bond
  • Share
  • Stock

27. 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

28. The owner of a companies shares.

  • Businessman
  • Bond master
  • Broker
  • Shareholder

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

  • Profit
  • Bonds
  • Dividends
  • Cash back

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

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

31. 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

32. 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.

33. Inventory investment includes spending on

  • goods firms sell to other firms.
  • the purchase of materials and supplies used in production.
  • goods in production
  • both b and c.

34. 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).

35. 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.

36. 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.

37. The largest component of investment is

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

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

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

39. 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

40. 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.

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

  • Purchases of durable equipment and structures
  • Residential construction expenditures
  • Changes automobile sales
  • Both a and b

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

  • volatile changes in permanent income.
  • volatile expectations.
  • volatile changes in current income.
  • volatile changes in productivity.

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

  • zero
  • positive
  • negative
  • one

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

  • Index
  • Risk
  • Maturity
  • Penalty

45. 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)

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

  • True
  • False

47. 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

48. 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

49. Semiannually means

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

50. 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

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