Title: Risks and Rewards
Course: Demo 1

Q: When an individual makes the decision to invest in securities such as stocks and bonds, some of the goals he or she will have as an investor include(s):
- selecting investments that combine to achieve his or her return objectives.
- selecting investments that match his or her personal risk tolerance.
- purchasing only investments that are recommended by friends and family.
A: selecting investments that combine to achieve his or her return objectives.; selecting investments that match his or her personal risk tolerance.

Q: Investing can bring profits in both the long and short-term; however, there are also costs associated with investing in securities. Among these costs is/are:
- the risk you take—the risk that you won’t get it all back.
- the opportunity cost of using the cash and forgoing all uses of that cash until it is returned.
- predictions on future performance.
A: the risk you take—the risk that you won’t get it all back.; the opportunity cost of using the cash and forgoing all uses of that cash until it is returned.

Q: When investors consider their investments, they often refer to the outcome of an investment as their “return.” In this context, a return is:
- calculated as annual rates of return.
- the percentage of return created for each unit (dollar) of original value.
- only a positive increase in the value of the investment.
A: calculated as annual rates of return.; the percentage of return created for each unit (dollar) of original value.

Q: Returns are created when:
- the investment creates income
- the investment gains (or loses) value
- the investment is originally made
A: the investment creates income; the investment gains (or loses) value

Q: One year ago you invested $10,000 in a stock (you bought 1,000 shares at $10 per share). The investment is now worth $11,000 (each share is worth $11). Your investment's return is:
- 12%
- 1%
- 10%
A: 10%

Q: You purchase stock in United Sure Thing because it has shown positive growth in a stable industry for the past 20 years. You have a great deal of confidence in the leadership of the company to make sound decisions that will protect the value of the company. Despite these positive signs, what potential sources of risk are still associated with your investment?
- economic risk
- market risk
- asset class risk
A: economic risk; market risk; asset class risk

Q: Estimating the expected return is complicated because many factors (i.e., current economic conditions, industry conditions, and market conditions) may affect that estimate. Which of the following are RELIABLE methods an investor can use to predict future returns on an investment?
- Analysists opinions about how the investment might perform if the Fed raises interest rates.
- An analysis of the information provided in financial blogs and posting on the Internet.
- An analysis of the past performance of the investment as a predictor of future performance.
A: An analysis of the past performance of the investment as a predictor of future performance.