5 Questions
What is an investment?
Investment is people's willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings.
How do we measure the rate of return on an investment?
The pure rate of interest is determined by market forces.
Why do individuals invest?
Individuals invest to trade off present consumption for a larger future consumption.
How do investors measure risk related to investments?
Investors measure risk through the demand for safe assets and increases in the riskiness of equity relative to bonds.
What contributes to the decline in Real Rate of Return?
A steady increase in income growth in emerging market economies during 2000–07 led to substantially higher saving rates in these economies.
Test your knowledge on the investment setting with questions related to reasons for investing, defining investment, measuring rate of return, and assessing investment risk.
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