Liquidity Buffer and Forms of Investment Quiz

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What does investment management involve?

Evaluating performance and adopting strategies

Evaluating performance and accumulating wealth

Defining investment objectives and adopting strategies (correct)

Defining investment objectives and evaluating performance

How can investment offset the effect of inflation?

By ignoring the effects of inflation

By doubling the effects of inflation

By increasing the impact of inflation

By reducing the effects of inflation in the future (correct)

What is the main objective when talking about investment?

Continuously accumulating wealth

Being financially compensated

Materialistic accumulation

Reducing future financial worries (correct)

What are some aspects included in investment management?

Optimizing results, considering risks, and evaluating performance Signup and view all the answers

Why is investment considered a means to achieve financial independence?

To be able to engage in activities of interest and have control over time Signup and view all the answers

What may happen if one fails to invest as per the text?

Forced to work primarily for financial compensation even in old age Signup and view all the answers

What is the main purpose of making investments?

To increase equity and earn profit Signup and view all the answers

How does investing affect current pleasures?

Decreases current pleasures Signup and view all the answers

What does an investment portfolio consist of?

Bank accounts and real estate Signup and view all the answers

Why are investments considered as a hedge against inflation?

To protect financial resources from losing value due to inflation Signup and view all the answers

What does investable cash refer to?

Money available for investment without affecting day-to-day operations Signup and view all the answers

How does investing in a bank account differ from investing in real estate?

Real estate is a tangible asset while bank accounts are not Signup and view all the answers

What is liquidity buffer?

The amount of cash that an entity must hold for unexpected cash requirements Signup and view all the answers

What is the main difference between a savings account and a time deposit?

Interest rate on time deposit is higher than savings account Signup and view all the answers

What are Treasury bills (T-bills)?

Short-term promissory notes issued by the national government Signup and view all the answers

What are commercial papers?

Interest bearing promissory notes issued by big firms Signup and view all the answers

What are mutual funds?

Pooling of investors' money by a stock corporation Signup and view all the answers

What are shares of stocks?

Shares in the ownership of corporate entities Signup and view all the answers

What are examples of defensive investments?

Time deposits, jewelry, real estate Signup and view all the answers

What does investment mix refer to?

Allocation of investable funds between different investment items Signup and view all the answers

Who is a portfolio manager?

A person or office making decisions on investments Signup and view all the answers

What are examples of money market instruments?

Commercial papers, treasury bills Signup and view all the answers

What mistake is highlighted pertaining to investing?

Failure to make a financial plan for the future Signup and view all the answers

What defines financial markets?

Venues for buying and selling financial instruments Signup and view all the answers

What do derivatives refer to in the context of financial instruments?

Instruments whose value is based on the value of other assets Signup and view all the answers

Which of the following is an example of a derivative?

Options Signup and view all the answers

What is the main distinguishing feature of a future contract?

It involves an obligation to trade at a set price on a fixed date Signup and view all the answers

Which of the following is considered a precious stone according to the text?

Diamonds Signup and view all the answers

What is the primary purpose of credit ratings for enterprises?

To assess their financial strength and debt repayment ability Signup and view all the answers

How is risk typically related to profit in investments?

The greater the risk, the greater the opportunity for profit Signup and view all the answers