#1
Which of the following is a characteristic of a fixed-rate mortgage?
Interest rate remains constant for the entire loan term
ExplanationStable interest rate throughout loan duration.
#2
What is the primary goal of financial planning?
To achieve financial goals
ExplanationTargeting desired financial outcomes.
#3
What does the term 'liquidity' refer to in finance?
Ability to convert an asset into cash quickly without significant loss
ExplanationEase of converting assets into cash.
#4
What is the purpose of a budget in financial planning?
To track income and expenses
ExplanationMonitoring financial inflows and outflows.
#5
What is the purpose of a 401(k) retirement plan?
To facilitate retirement savings through tax advantages
ExplanationTax-efficient retirement savings vehicle.
#6
What is the purpose of financial ratios in financial analysis?
To measure a company's financial performance
ExplanationAssessment of company's financial health.
#7
Which financial ratio measures a company's ability to pay its short-term obligations?
Current ratio
ExplanationAssessment of short-term liquidity.
#8
What is the concept of 'opportunity cost' in finance?
Cost of an alternative that must be forgone in order to pursue another action
ExplanationThe sacrifice of alternative choices.
#9
What is the formula to calculate compound interest?
A = P(1 + r/n)^(nt)
ExplanationCalculation method for compounded growth.
#10
Which of the following is NOT a factor affecting the time value of money?
Credit score
ExplanationExcludes individual credit rating.
#11
Which of the following statements about bonds is true?
Bonds are a form of debt financing
ExplanationDebt instruments for financing.
#12
What is the role of the Securities and Exchange Commission (SEC) in financial markets?
Regulating and overseeing the stock market
ExplanationOversight of securities trading.
#13
Which of the following statements is true about diversification in investment?
It decreases risk
ExplanationRisk mitigation through portfolio variety.