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18 Questions

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Investment Principles and Steps Quiz

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Questions and Answers

What is the first step in investing according to the text?

Meeting investment prerequisites (correct)

Selecting suitable investments

Constructing a diversified portfolio

Developing a written investment plan

Which of the following is NOT an example of establishing investment goals as mentioned in the text?

Accumulating retirement funds

Sheltering income from taxes

Saving for major expenditures

Starting a small business (correct)

Why is adopting an investment plan important?

To specify target dates for goals (correct)

To evaluate investment vehicles

To conduct risk assessments

To select suitable investments

What should be done when evaluating investment vehicles?

Assess potential return and risk Signup and view all the answers

How can suitable investments be selected?

Gather information on specific investments Signup and view all the answers

Why is constructing a diversified portfolio important in investing?

To use a mix of different investments Signup and view all the answers

Which type of investment represents ongoing ownership in a business or property?

Equity securities Signup and view all the answers

What is the main characteristic of debt securities?

Investors lend funds in exchange for interest income and repayment of loan. Signup and view all the answers

What does the term 'high risk' refer to in investments?

Chance that actual investment returns will differ from those expected. Signup and view all the answers

What is the main characteristic of real property as an investment?

Includes land and buildings. Signup and view all the answers

Which type of security neither represents debt nor ownership in a business or property?

Derivative securities Signup and view all the answers

What distinguishes indirect investments from direct investments?

Investor owns an interest in a professionally managed collection of securities or properties. Signup and view all the answers

What is the IASB's definition of investment?

Assets held by an entity for wealth accretion Signup and view all the answers

Which of the following is NOT mentioned as a type of investment in the text?

Cryptocurrencies Signup and view all the answers

During which life cycle phase are individuals focused on accumulating assets for immediate or long-term goals?

Accumulation Phase Signup and view all the answers

What is a common reason mentioned in the text for investing in subsidiaries and associates?

For meeting business requirements Signup and view all the answers

Which of the following is NOT mentioned as a way to evaluate an investment vehicle in the text?

Individual Emotions Signup and view all the answers

What is the primary purpose of investing according to the text?

To accumulate wealth over time Signup and view all the answers