Lesson 1: Investment Setting

Question 1

Is both a science and an art of correct application of the economic and accounting concepts and principles that define the system structure and process of management allocation and utilization of financial resources investments and expnditures.

Answer 1

Finance

Question 2

Giving up immediate consumption of excess earnings or savings for a future larger amount of money that will be available for future consumption.

Answer 2

Investment

Question 3

Trade-off of present consumption for a higher level of future consumption.

Answer 3

Investment

Question 4

It is a broad field that encompasses the management of resources within an organization or for an individual.

Answer 4

Finance

Question 5

Deals with money management, including budgeting, financial planning, risk management, and financial decision-making.

Answer 5

Finance

Question 6

It is a broader field that deals with the overall management of financial resources.

Answer 6

Finance

Question 7

Specifically refers to the allocation of money or capital for the expectation of generating future income or profit.

Answer 7

Investment

Question 8

It includes purchasing assets in the hope that they will appreciate value or generate more wealth over time.

Answer 8

Investment

Question 9

It is a specific subset of finance that involves allocating capital with the expectation of earning a return on that capital over time.

Answer 9

Investment

Question 10

The current commitment of investment

Answer 10

1. The time the funds are committed
2. the expected inflation rate during this period
3. the uncertainty of future payments

Question 11

Funds invested in tangible and productive assets such as machines, land, or plant

Answer 11

Real Investment

Question 12

The productive capacity of the economy

Answer 12

Real Investment

Question 13

Funds invested in paper or electronic contracts such as stocks and bonds

Answer 13

Financial Investment

Question 14

Means by which individuals in wel developed economies hold their claims on real assets

Answer 14

Financial Investment

Question 15

Advantages of Investing in Financial Assets

Answer 15

1.Divisibility
2. Marketability or Liquidity
3. Shorter holding period
4. Information availability

Question 16

People who are investing on their own.

Answer 16

Individual Investors

Question 17

May be referred as retail Investors

Answer 17

Individual investors

Question 18

Legal entities that pool resources to purchase securities and other investment

Answer 18

Institutional Investors

Question 19

Trade securities in large quantities

Answer 19

Institutional InvestorsB

Question 20

Buying or selling financial instruments through financial markets

Answer 20

Direct Investing

Question 21

Buying or selling financial instruments through financial intermediaries

Answer 21

Indirect Investing

Question 22

Has Control; Can decide when to buy/sell

Answer 22

Direct Investing

Question 23

Professionally managed; Allow small investors to invest; Allow investors to own diversified pools of risks and returns

Answer 23

Indirect Investment

Question 24

Common types of financial investment vehicles

Answer 24

a. Short-term investment vehicles
b. Fixed-Income securities
c. Common Stock
d. Speculative Investment Vehicle

Question 25

Known as money market instruments

Answer 25

Short-term Investment Vehicles

Question 26

Matures in a year or less

Answer 26

Short-term Investment Vehicles

Question 27

Can be liquidated to cash quickly

Answer 27

Short-term Investment Vehicles

Question 28

Examples of Short-term Investment Vehicles

Answer 28

• Certificate of deposits
• Treasury bills
• Commercial paper

Question 29

Long term investment

Answer 29

Fixed Income Security

Question 30

Known as Capital Market Instruments

Answer 30

Fixed Income Security

Question 31

Return is fixed over a certain period of time

Answer 31

Fixed Income Security

Question 32

Examples of Fixed Income Security

Answer 32

a. Preferred stock
b. Long-term debt securities (bonds)

Question 33

Debt instrument issued by the government that matures longer than a year

Answer 33

Treasury notes/bonds

Question 34

longer term debt instruments. A means by which private institutions borrow money from the public.

Answer 34

Corporate Bonds

Question 35

Examples of Long term debt securities (bonds)

Answer 35

• secured bonds
• unsecured bonds (debentures)
• callable bonds
• convertible bonds

Question 36

Are Common stocks

Answer 36

Equity Securities

Question 37

Ownership share in a corporation

Answer 37

Equity Securities

Question 38

Has a residual claim and a limited liability feature

Answer 38

Equity Securities