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Investment Management

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Questions and Answers

Which one of the following accurately describes a real investment/asset?

It is intangible and does not contribute to the productive capacity of the economy.
It can be tangible or intangible and is used to produce goods and services. (correct)
It is a 'paper' contract that claims to the income generated by real assets.
It is a financial asset that directly contributes to the productive capacity of the economy.

Which one of the following accurately describes a financial investment/asset?

It is a 'paper' contract that claims to the income generated by real assets. (correct)
It can be tangible or intangible and is used to produce goods and services.
It is tangible and directly contributes to the productive capacity of the economy.
It is intangible and does not contribute to the productive capacity of the economy.

What is the investment process?

The decision about how much to invest in securities.
The decision about which securities to invest in.
The decision about which securities and how much to invest in. (correct)
The decision about how much to invest in real assets.

During a high earnings period, it is advisable to...

<p>invest in financial assets like stocks and bonds. (A)</p> Signup and view all the answers

What is one mechanism to mitigate agency problems?

<p>Compensation plans that tie the income of managers to the success of the firm. (D)</p> Signup and view all the answers

Flashcards

Real investment

A physical or conceptual item used to make products or services.

Financial investment

A paper contract, like stock, that represents the right to the income from a real asset.

Investment Process

Choosing which securities, like stocks or bonds, to buy, and how much to invest.

High Earnings Period

When a company makes a lot of money, it's a good time to invest in stocks and bonds.

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Agency Problem Solution

A way to make managers care about the company's success by tying their pay to the company's performance.