Chapter01TheInvestmentSetting.docVIP

Chapter 01 The Investment Setting ? True / False Questions? 1.?In an efficient and informed capital market environment, those investments with the greatest return tend to have the greatest risk.?True????False ? 2.?Rare paintings and baseball cards may be considered as forms of investment.?True????False ? 3.?Mutual funds are a form of direct equity claims.?True????False ? 4.?Warrants are a form of direct equity claims.?True????False ? 5.?Pension funds are a form of indirect equity claims.?True????False ? 6.?An investor can totally eliminate time-consuming investment management activities by participating in a mutual fund or limited partnership.?True????False ? 7.?The riskiness of an investment is measured by the dispersion of possible outcomes.?True????False ? 8.?Unlike the risk-free rate, the level of the risk premium varies by investment.?True????False ? 9.?The Ibbotson study showed that high-risk investments generate high returns.?True????False ? 10.?Diversification is the process of determining the risk premium.?True????False ? 11.?The Tax Act of 2003 offers greater potential for wealth accumulation.?True????False ? 12.?The age and economic circumstances of an investor are important variables in determining an appropriate level of risk.?True????False ? 13.?It is generally thought that young, upwardly mobile people should take less risk than elderly people living on a fixed income.?True????False ? 14.?Commodity futures are a form of financial asset.?True????False ? 15.?Diamonds represent a form of real assets, but cattle do not.?True????False ? 16.?To achieve maximum diversification benefits, an investor should invest in projects which are highly correlated.?True????False ? 17.?In general, inflation results in a loss of purchasing power to the investor.?True????False ? 18.?The only compensation anticipated from an investment is for inflation protection.?True????False ? 19.?Investment is the commitment of current funds in anticipation of rece