Financial Instruments and Investments Quiz

Bonds are generally considered low-risk because they provide fixed income.

ETFs are investment funds traded on stock exchanges, holding assets such as stocks or bonds.

ROI measures the profitability of an investment relative to its cost.

There is no such thing as a 'stock bond'; bonds are debt securities issued by governments or corporations.

Stock exchanges provide a platform for investors to buy and sell securities such as stocks and bonds.

Diversification spreads investment across different assets to minimize the impact of any single asset's performance on the overall portfolio.

Stocks represent ownership in a company, entitling the holder to a portion of the company's assets and profits.

Call options give the holder the right to buy an asset at a predetermined price within a specified timeframe.

Mutual funds pool money from multiple investors to invest in a diversified portfolio of securities.

A stop-loss order automatically sells a security when its price falls to a specified level, limiting potential losses.

The bid price is the highest price a buyer is willing to pay for a security.

Value investing focuses on buying undervalued assets with the expectation that their value will increase over time.

Investment banks assist companies in raising capital and advise on mergers, acquisitions, and other financial transactions.

The Sharpe ratio quantifies the risk-adjusted return of an investment, comparing its return to its risk.

Interest rates do not directly affect the price of options; factors such as underlying asset price, volatility, and time to expiration do.

Hedge funds aim to achieve high returns for investors by employing a range of investment strategies, often including leveraging and short selling.

Hedge funds typically engage in active management, frequently trading and adjusting their portfolios to maximize returns.