Fin 303 ch 14
Investment Fundamentals Quiz
Test your knowledge on investment strategies and instruments with our engaging quiz! Dive into key concepts related to direct and indirect investments, index funds, hedge funds, and more.
This quiz is perfect for anyone looking to enhance their understanding of investment principles and market dynamics.
- Assess your investment knowledge
- Learn about different investment types
- Challenge yourself with 15 thought-provoking questions
The investment most likely to be purchased by an investor with a preference for direct investments is a share in:
a company.
a mutual fund.
an exchange-traded fund (ETF).
Relative to indirect investments, direct investments:
are less expensive to trade.
offer more control to investors.
allow small investors to share in the purchase of large assets.
Direct investments allow retail investors to:
own diversified pools of risk.
use the services of professional managers.
choose when to buy or sell to minimise tax liabilities.
Compared with shares of closed-end funds, shares of open-end mutual funds:
A are not redeemable.
are exchange traded.
trade at net asset value.
Exchange-traded funds (ETFs) most likely:
Trade continuously.
are actively managed.
have relatively high management fees.
An index that gives each security’s weight according to the proportion of its market capitalisation is:
a price-weighted index.
a value-weighted index.
an equal-weighted index.
The process of adding and removing securities included in a security market index is called
Churning.
rebalancing.
reconstitution.
Rebalancing is most likely to be associated with an index that is:
price weighted.
equal weighted.
capitalisation weighted.
From the perspective of an investor, index funds are popular because they are generally
broadly diversified.
tax-free investments.
not subject to management fees.
An index fund will sell securities if:
the value of the benchmark index falls.
withdrawal requests are greater than new receipts from investors.
dividends, interest, and investor contributions are greater than withdrawals.
Hedge funds are most likely to:
impose capital lock-up periods.
raise capital from retail investors.
have relatively low management and performance fees.
Increasing the hurdle rate for a hedge fund manager will usually lead to total fees that are
Lower
unchanged.
Higher
An unfavourable feature of hedge funds for most investors is the:
hurdle rate.
lock-up period.
high-water mark.
A high-water mark is incorporated in a hedge fund fee structure to benefit:
Investors
Fund managers.
both investors and fund managers.
The ability to defer taxes in tax-advantaged accounts will be most beneficial for investors who expect their tax rates in the future to:
Increase
Decrease
remain unchanged.
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