AnswersPersonal Finance - EL3403Investing and Financial Markets

Investing and Financial Markets Answers

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1
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What can be traded in a commodities market?

A
stock
B
bonds
C
oil
D
debt
2
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If a company pays dividends on a stock, does that mean that the stock has appreciated in value? Why or why not?

A
Yes, the payment of dividends indicates that a stock’s value has increased.
B
No, the payment of dividends indicates that a company has earned profits.
C
Yes, the payment of dividends indicates that a company’s assets have grown.
D
No, the payment of dividends indicates that a company can repay investors.
3

Which factors can affect a stock’s price? Check all that apply.market performancethe company’s financial healththe quantity products producedlocation of the companythe economy

A
market performance
B
the company’s financial health
C
the quantity products produced
D
location of the company
E
the economy
4

Which statement best describes how an investor makes money off debt?

A
An investor makes money by issuing bonds.
B
An investor makes money by earning interest.
C
An investor makes money by raising capital.
D
An investor makes money by being repaid for the principal.
5

Are the buying and selling of stocks centralized activities? Why or why not?

A
Yes, the New York Stock Exchange is the primary exchange for all the world’s most important trades.
B
No, people can buy stocks anywhere, and they do not need to go through a market.
C
Yes, the world’s stock markets are coordinated exchanges, and they are dependent on one another.
D
No, there are many stock markets around the world, and they are independent of one another.
6

Which describes an investor’s primary goal of buying a loan?

A
to grow a business
B
to earn a profit off the interest
C
to bolster the economy
D
to provide capital to a business
7

Capital appreciation refers to

A
the increased value of an asset.
B
the ability to make a profit from owning stock.
C
the distribution of earnings to shareholders.
D
the profitable sale of shares.
8

Which types of investments are securities?

A
both debt and equity
B
debt only
C
equity only
D
neither debt nor equity
9

Which is true about investments and risk?

A
Low-risk investments have a high return over the long run.
B
High-risk investments usually fail.
C
Safe investments are always somewhat profitable.
D
Every investment carries some degree of risk.
10

Since stocks can be traded online, which purpose is best served by markets?

A
Markets regulate transactions.
B
Markets are where the trades actually occur.
C
Markets sell the assets to be traded.
D
Markets ensure that the transactions are secure.
11

Which are the most likely uses of capital invested in a business? Check all that apply.

A
paying taxes
B
hiring workers
C
repaying investors
D
producing goods
E
distributing goods
F
buying materials

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