#1
In financial markets, what does ROI stand for?
Return On Investment
ExplanationMeasure of profitability of an investment relative to its cost.
#2
Which financial ratio measures a company's ability to meet its short-term obligations?
Current Ratio
ExplanationRatio indicating a company's liquidity and ability to cover short-term liabilities.
#3
Which financial ratio measures a company's ability to generate profit from its assets?
Return on Assets (ROA)
ExplanationIndicator of how profitable a company is relative to its total assets.
#4
What is the formula for compound interest?
P = A(1 + r/n)^(nt)
ExplanationFormula for calculating future value of an investment with compound interest.
#5
Which mathematical concept is associated with the shape of a yield curve?
Calculus
ExplanationMathematical tool for analyzing rates of change.
#6
What is the present value formula used for?
Discounting future cash flows
ExplanationTechnique for determining the current worth of a future sum of money.
#7
What is the concept of beta in finance?
A measure of systematic risk
ExplanationMeasure of a stock's volatility in relation to the market.
#8
What does the term 'hedging' refer to in financial markets?
Risk management strategy
ExplanationStrategy to minimize or offset financial risk.
#9
In the context of options, what does 'in-the-money' mean?
The option can be exercised profitably
ExplanationOption with intrinsic value.
#10
What is the Black-Scholes formula used for?
Valuing European-style options
ExplanationMathematical model for pricing options contracts.
#11
What is the primary purpose of the Sharpe ratio?
Measure risk-adjusted return
ExplanationTool for evaluating risk-adjusted return of an investment.
#12
What does the Efficient Market Hypothesis (EMH) propose about financial markets?
Prices reflect all available information
ExplanationTheory suggesting that it is impossible to consistently outperform the market.
#13
Which mathematical concept is used to measure the sensitivity of an option's price to changes in the underlying asset's price?
Delta
ExplanationMeasurement of the rate of change of an option's price in relation to changes in the price of the underlying asset.
#14
What is the purpose of the Monte Carlo simulation in finance?
Valuing options
ExplanationTechnique for valuing options by simulating various possible paths of the underlying asset's price.
#15
What is the primary objective of the Black-Litterman model in finance?
Optimizing portfolio allocation
ExplanationModel for determining the optimal allocation of assets in an investment portfolio.