#1
What is the purpose of a stock option?
To provide the right to buy or sell a stock at a specified price within a certain period
ExplanationStock options grant the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specified timeframe.
#2
What is the primary function of a central bank?
To manage the country's monetary policy
ExplanationCentral banks oversee monetary policy, including controlling interest rates and money supply, to achieve economic stability and growth.
#3
What is the primary function of the Securities and Exchange Commission (SEC)?
To regulate the stock market and protect investors
ExplanationThe SEC regulates securities markets and protects investors by enforcing securities laws and promoting fair and transparent markets.
#4
Which of the following is a characteristic of a bear market?
Declining stock prices
ExplanationA bear market is characterized by a prolonged period of declining stock prices, often accompanied by negative investor sentiment.
#5
What is the purpose of a put option?
To provide the right to sell a stock at a specified price within a certain period
ExplanationPut options grant the holder the right, but not the obligation, to sell a stock at a predetermined price within a specified timeframe.
#6
Which of the following is considered a leading economic indicator?
Building Permits
ExplanationBuilding permits are considered a leading economic indicator because an increase in permit issuance often precedes a rise in construction activity, reflecting economic growth.
#7
Which of the following is a derivative financial instrument?
Option
ExplanationOptions are derivative financial instruments as their value is derived from an underlying asset, typically a stock.
#8
What does the Consumer Confidence Index (CCI) measure?
The level of optimism or pessimism among consumers regarding the economy
ExplanationCCI measures the confidence of consumers in the economy, reflecting their perceptions of present and future economic conditions.
#9
Which of the following is NOT a component of the Dow Jones Industrial Average (DJIA)?
Coca-Cola Company
ExplanationThe Coca-Cola Company is not a component of the DJIA, which consists of 30 large, publicly traded companies representing various sectors of the economy.
#10
What does the term 'liquidity' refer to in finance?
The ease with which an asset can be converted into cash without affecting its market price
ExplanationLiquidity is the ability to convert an asset into cash quickly without significantly impacting its market value.
#11
What is the purpose of a futures contract?
To guarantee the right to buy or sell an asset at a predetermined price on a future date
ExplanationFutures contracts provide an agreement to buy or sell an asset at a specified price on a future date, serving as a risk management tool.
#12
What is the primary role of a bond rating agency?
To evaluate the creditworthiness of bond issuers
ExplanationBond rating agencies assess the creditworthiness of bond issuers, providing investors with information about the risk associated with a particular bond.
#13
Which economic indicator is often referred to as the 'mother of all indicators'?
Gross Domestic Product (GDP)
ExplanationGDP is considered the 'mother of all indicators' as it measures the total economic output of a country, providing a comprehensive view of its economic health.
#14
What is the purpose of a credit default swap (CDS)?
To provide insurance against the default of a particular bond or loan
ExplanationCDSs offer insurance against the default of a specific bond or loan, providing risk mitigation for investors.
#15
What is the primary function of a central clearing counterparty (CCP) in financial markets?
To act as an intermediary for clearing and settling trades
ExplanationCCPs facilitate clearing and settlement of trades by acting as intermediaries, reducing counterparty risk in financial markets.