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Investment Definitions Quiz

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Questions and Answers

Which of the following best describes investment?

Exchanging goods and services in the present with the expectation of a higher return in the future

Spending money on goods for immediate consumption

Holding cash for potential future use

Acquiring an asset or committing money with the purpose of earning future income or benefiting from future appreciation in value (correct)

What is the purpose of investment?

To hold onto assets without any intention of future gain

To make money work for you or let your money grow (correct)

To spend excess cash on immediate consumption

To minimize risk and maximize immediate returns

What is the likelihood associated with risk in investments?

High risk in all types of investments

High risk in government securities and low risk in stocks and new business ventures

Low risk in all types of investments

Low risk in government securities and high risk in stocks and new business ventures (correct)

Which category of investment includes debentures and bonds?

Fixed income investments Signup and view all the answers

What distinguishes variable income investments such as equities and real estate?

They do not provide a fixed return annually and their value appreciates in the long term Signup and view all the answers

Fixed income investments always provide a fixed return annually

True Signup and view all the answers

Variable income investments, such as equities and real estate, do not appreciate in value in the long term

False Signup and view all the answers

Investment is the purchase of goods aimed at earning income in the present

False Signup and view all the answers

Investments in government securities are associated with high risk

False Signup and view all the answers

The purpose of investment is to make money work for you or let your money grow

True Signup and view all the answers

Study Notes

Investment Basics

Investment is the act of putting money into something with the expectation of earning a profit or income.

Purpose of Investment

The primary purpose of investment is to make money work for you or let your money grow.

Risk in Investments

Risk in investments is associated with uncertainty, and the likelihood of loss or gain is unknown.

Types of Investments

Debt investments include debentures and bonds, which offer a fixed return.
Variable income investments, such as equities and real estate, have a potential for growth in value over time.

Characteristics of Fixed and Variable Income Investments

Fixed income investments provide a fixed return annually, such as bonds and debentures.
Variable income investments do not offer a fixed return, but have the potential for long-term growth in value, for example, equities and real estate.