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Welcome to our Investment Basics quiz.

The full Investment Competence course thoroughly covers all the basics of investing and would make you competent in answering these and hundreds more questions about investing. There is no grade for this quiz. If, after taking this quiz, you feel that your knowledge of the basics (or the knowledge of someone you want to train) can improve, click on the "Investing" button, check out the data, contact us and we will be delighted to help. Please use the glossary for the definition of any financial or investment terms that you do not fully understand.

1. How does a company earn a profit? Select all that apply.
A) By selling shares to the public
B) By insuring that its sales exceed its expenses
C) Mainly through political donations
 D) By borrowing money and spending it
 E) By producing a product or service, promoting and selling it and spending
2. What is the relevance of supply and demand factors to the price of shares? Select all that apply.
A) None really. Supply and demand are mainly subjects for academic study
 B) Too large a supply for existing demand will put downward pressure on share price
 C) Share prices are completely random and are not influenced by either supply or demand
 D) A large demand for a limited supply of shares will put upward pressure on the price
 E) Lots of buyers when there are few sellers will probably cause prices to rise.
3. Which of the following factors have been proven to have an influence on the trend in market price of a company's stock?
A) Government tax policy
 B) Fundamental financial performance of the company
C) Historical price and volume movements of the stock
 D) Usage of healing crystals
 E) Promises from politicians in an election year
4. Which of the following are the three key pieces of information on a bond?
A) Face value or par value
 B) The "story" on this bond
C) Coupon rate
 D) Maturity date
 E) Dividend payments
5. Under what circumstances would you expect a bond holder to sell a bond?
A) The price of a bond might be trading at a premium - above face value.
 B) General interest rates have been high for years but are now starting to fall and the bond holder believes they will fall much further
 C) General interest rates have been low and the bond holder believes that interest rates will start to rise in the near future
 D) The bond holder might want some cash
 E) Because it belongs to the bond holder and he or she feels like selling it
6. Which of the following statements appy to mutual funds?
A) They can consist of a variety of different investments whose total value is equal to the sum of the investment values less costs
 B) Several people all agree to sell at the same time thereby driving the price up
 C) Individual investors doing their own thing
 D) They are managed by professional money managers
 E) Mutual funds may be a good way to start investing as there are funds that require only small investment amounts
7. Why would someone want to sell or buy a commodity for future delivery at a fixed price even though the commodity has not yet been produced?
A) To lock in a price that will cover the costs of producing the commodity plus a profit
 B) They probably need their head examined
 C) They may want to speculate on the outcome of long range weather predictions
 D) To make sure that an uninterrupted supply of the commodity is available when needed
 E) They are conservative and only put their money in very safe investments
8. Which of the following apply to the terms Bull and Bear?
A) A tug of war between two mythological animals having little relevance to modern day investing
 B) A bull market means prices are generally falling
 C) A bull market means prices are generally rising
 D) An investor can make money by selling short in a bear market.
 E) Bull means that the story put out on the stockmarket is probably false so let the buyer beware
9. Select the correct answer or answers:
A) The most effective way to handle inflation is to increase government spending
 B) When a government or bank raises interest rates, this always has a beneficial effect on one and all
 C) Ideally, money should be backed by actual goods or services produced
 D) Government financing of its overspending can give rise to inflation
 E) Lowering interest rates tends to increase money supply
10. Which of the following are investment tactics that can possibly help achieve some success in investing?
A) Keep up to date with what is happening in the general economy and reallocate your assets as necessary
 B) Use dollar cost averaging to help you buy less at relatively high prices and more at relatively low prices
 C) Don't get involved in the first place as it is too risky
 D) Be alert to any falsehoods or lack of data and avoid investments that have these warning signs
E) Constantly worry about past mistakes and ignore any future possibilities

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