How Well Do You Know About The Principle of Investment Assignment?

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| By Tanya Mishra
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Tanya Mishra
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  • 1/10 Questions

    Banks that help companies and governments raise overall capital are known as what?

    • Investment banks
    • Taxation banks
    • Financial market
    • None of the above
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About This Quiz

We welcome you to this fun and informative principle of investment assignment quiz! Understanding the world of money and finances can be a daunting experience. Worry not! We are here to help you learn! Just answer a few simple questions to strengthen your knowledge about the intricate aspects of the financial world! We hope this quiz can help you understand some exciting new information on money and finances. There's no time bar on the test, so feel free to play it as often as you prefer. Good Luck, and keep learning!

How Well Do You Know About The Principle Of Investment Assignment? - Quiz

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  • 2. 

    Investors only invest in high-risk investments if only which of the following conditions are met? 

    • The predicted return worth taking a risk

    • There is no extra cost

    • The return is short 

    • When there is no safe investment option

    Correct Answer
    A. The predicted return worth taking a risk
    Explanation
    Investors are more likely to invest in high-risk investments if they believe that the potential return is worth the risk involved. This means that they expect to earn a significant profit from the investment in order to justify the higher level of risk. The other conditions mentioned in the question, such as no extra cost, a short return period, or the absence of safe investment options, may be factors that could influence an investor's decision, but they are not the primary condition for investing in high-risk investments.

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  • 3. 

    The review of projects after they have been implemented is known as what? 

    • Postaudit

    • Preaudit

    • Capital budgeting

    • Context correlation

    Correct Answer
    A. Postaudit
    Explanation
    Postaudit refers to the review of projects after they have been implemented. This process involves evaluating the actual outcomes and comparing them with the expected results. It helps in assessing the effectiveness and efficiency of the project, identifying any deviations from the planned objectives, and determining the lessons learned for future improvements. Preaudit, on the other hand, involves reviewing projects before their implementation. Capital budgeting refers to the process of planning and allocating funds for long-term investment projects. Context correlation is not directly related to the review of projects after implementation.

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  • 4. 

    The areas through which funds flow easily are called what? 

    • Financial markets

    • Real markets

    • Investment banks

    • Fiscal areas

    Correct Answer
    A. Financial markets
    Explanation
    Financial markets are areas where funds flow easily because they provide a platform for buying and selling financial instruments such as stocks, bonds, and currencies. These markets facilitate the transfer of funds between investors and borrowers, allowing for efficient allocation of capital. They provide liquidity, transparency, and a fair pricing mechanism, making it easier for individuals and institutions to invest or raise funds. Investment banks may play a role in facilitating transactions within financial markets, but they are not the only entities involved. Real markets refer to the physical markets for goods and services, while fiscal areas relate to government finances.

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  • 5. 

    The process of choosing securities and other assets for purchase is known as what? 

    • Taxation 

    • Property

    • Investments

    • Financial management

    Correct Answer
    A. Investments
    Explanation
    The process of choosing securities and other assets for purchase is known as investments. This involves carefully selecting and allocating funds into various financial instruments such as stocks, bonds, real estate, or mutual funds, with the objective of generating returns and growing wealth over time. Investments require thorough analysis, risk assessment, and consideration of factors like market conditions, financial goals, and individual risk tolerance. By making informed investment decisions, individuals or organizations aim to maximize their financial resources and achieve long-term financial stability or profitability.

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  • 6. 

    The debt-to-equity ratio that is selected by a firm depends on what? 

    • The nature of the business by the firm

    • The cost of debt and the cost of equity capital.

    • The attitude of the firm towards risk.

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    The debt-to-equity ratio selected by a firm depends on several factors. Firstly, the nature of the business plays a role as different industries have different levels of risk and capital requirements. Secondly, the cost of debt and the cost of equity capital are important considerations as they impact the firm's overall cost of capital. Lastly, the attitude of the firm towards risk is a crucial factor as some firms may be more conservative and prefer lower levels of debt, while others may be more aggressive and comfortable with higher levels of debt. Therefore, all of the above factors influence the debt-to-equity ratio chosen by a firm.

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  • 7. 

    Which of the following is amongst the advantages of the Sole proprietorship type business?

    • Wider access to capital

    • No excessive taxation

    • Lower income taxes

    • More expertise

    Correct Answer
    A. Lower income taxes
    Explanation
    The advantage of a sole proprietorship type business is that it typically incurs lower income taxes. This is because the business owner reports their business income on their personal tax return, and is only taxed at their individual tax rate. Unlike other business structures, such as corporations, sole proprietorships do not face double taxation, where both the business and the owner are taxed separately. Therefore, lower income taxes is a benefit of the sole proprietorship type business.

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  • 8. 

    Which of the following is NOT considered a fundamental principle of investment?

    • Diversification 

    • Risk and Return 

    • Market Timing 

    • Long-term perspective

    Correct Answer
    A. Market Timing 
    Explanation
    Market timing, which involves trying to predict market fluctuations to buy low and sell high, is often considered speculative and unreliable. While it can yield high returns, it's incredibly difficult to consistently time the market correctly. The other options are fundamental principles: diversification spreads risk across different assets, understanding the relationship between risk and return is crucial for informed decision-making, and a long-term perspective helps ride out short-term market volatility.

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  • 9. 

    Investors can easily determine the compound growth rate of an investment by what? 

    • GDP

    • Geometric mean

    • Calculus mean

    • Arithmetic median

    Correct Answer
    A. Geometric mean
    Explanation
    The geometric mean is used to determine the compound growth rate of an investment because it takes into account the compounding effect over time. It is calculated by taking the nth root of the product of n numbers, where each number represents the growth rate of the investment for a specific period. This provides a more accurate measure of the overall growth rate compared to other measures such as arithmetic median or calculus mean. GDP, on the other hand, is a measure of the economic output of a country and is not directly related to calculating the compound growth rate of an investment.

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  • 10. 

    Which of the following is the best way to measure cash flows?

    • Budget properly and keep the accounts to the mark

    • Treat depreciation as a negative cash flow

    • Consider only incremental costs and revenues

    • All of the above

    Correct Answer
    A. Treat depreciation as a negative cash flow
    Explanation
    Treating depreciation as a negative cash flow is the best way to measure cash flows because depreciation represents the decrease in value of an asset over time. By considering depreciation as a negative cash flow, it allows for a more accurate representation of the actual cash flows in a business. This approach takes into account the decrease in value of assets and the impact it has on the overall cash flow of the business.

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  • Current Version
  • Oct 25, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Nov 13, 2022
    Quiz Created by
    Tanya Mishra
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