Investment Instruments and Valuation Quiz
Explore valuation concepts with 12 questions covering NPV, risk-return, stocks, bonds, options, CAPM, and more. Test your investment expertise now!
#1
What is the primary purpose of investment instruments?
To provide a source of income
To protect against inflation
To generate returns
To provide tax benefits
#2
Which of the following is a debt instrument?
Stocks
Bonds
Mutual funds
Real estate
#3
What is the formula for calculating the Net Present Value (NPV) of an investment?
NPV = Cash inflows / Cash outflows
NPV = Initial investment + (Cash inflows - Cash outflows)
NPV = Cash inflows - Cash outflows
NPV = Initial investment / (1 + Discount rate)^n
#4
Which of the following is NOT a factor affecting the valuation of a stock?
Earnings per share (EPS)
Price-to-Earnings (P/E) ratio
Dividend yield
Market capitalization
#5
What is the difference between stocks and bonds?
Stocks represent ownership in a company, while bonds represent debt.
Stocks pay fixed interest, while bonds pay dividends.
Stocks have a maturity date, while bonds do not.
Stocks have a higher risk profile than bonds.
#6
Which of the following is an example of a derivative instrument?
Stocks
Bonds
Options
Mutual funds
#7
What is the role of dividends in investment?
To provide a steady source of income.
To increase the price of a stock.
To reduce the risk of an investment.
To provide tax benefits.
#8
What is the concept of 'Risk-Return Tradeoff' in investing?
Higher returns are associated with lower risk
Higher risk is necessary for higher returns
Risk and return are not related
Risk can be eliminated by diversification
#9
What is the concept of 'Time Value of Money'?
Money loses value over time due to inflation.
Money has different values at different times.
Money should be invested for the long term to maximize returns.
Money should be saved in a bank account to preserve its value.
#10
Which valuation method is commonly used for real estate investment?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Comparable Company Analysis (CCA)
Capital Asset Pricing Model (CAPM)
#11
What is the 'Efficient Market Hypothesis'?
Stock prices fully reflect all available information
Stock prices are random and unpredictable
Stock prices can be manipulated easily
Stock prices are always undervalued
#12
What is the purpose of the Capital Asset Pricing Model (CAPM) in investment?
To calculate the intrinsic value of a stock
To determine the required rate of return for an asset
To estimate the future cash flows of an investment
To evaluate the risk of a stock
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