#1
What does APR stand for in finance?
Annual Percentage Rate
ExplanationInterest rate charged annually on borrowed money.
#2
Which of the following is a type of investment account that provides tax advantages for retirement savings?
IRA
ExplanationIndividual Retirement Account with tax benefits for retirement savings.
#3
What is the primary purpose of a budget?
To plan how income will be spent or saved
ExplanationOutline of planned income allocation for spending or saving.
#4
Which of the following is a type of risk associated with investing?
Inflation risk
ExplanationRisk of decreasing purchasing power due to inflation.
#5
What is the difference between a stock and a bond?
Stock represents ownership in a company, while a bond is a loan to a company or government
ExplanationStock signifies ownership, while bonds represent debt.
#6
Which of the following is a key component of a credit score?
Length of credit history
ExplanationDuration of time credit accounts have been open and active.
#7
What is the term used to describe the increase in value of an asset over time?
Appreciation
ExplanationRise in value of an asset over time.
#8
Which of the following best describes diversification in investing?
Investing in multiple asset classes
ExplanationSpreading investments across different types of assets to manage risk.
#9
What does the term 'compound interest' refer to?
Interest paid on the original principal and on the accumulated past interest
ExplanationInterest calculated on the initial amount plus the interest accumulated over previous periods.
#10
Which of the following is a characteristic of a bear market?
Declining stock prices
ExplanationPeriod of falling stock prices and pessimism in the market.
#11
What is the purpose of insurance?
To protect against financial loss
ExplanationFinancial protection against unforeseen events or risks.
#12
What is the 'time value of money' concept in finance?
Money earned in the future is worth more than the same amount today due to its potential earning capacity
ExplanationPrinciple that money available today is worth more than the same amount in the future due to its potential earning capacity.
#13
What does the term 'liquidity' refer to in financial markets?
How easily an asset can be bought or sold
ExplanationEase of buying or selling an asset without significantly affecting its price.
#14
What is the 'Rule of 72' used for in finance?
To calculate how long it takes for an investment to double at a given interest rate
ExplanationQuick method to estimate the time it takes for an investment to double based on its compound interest rate.
#15
What is the role of the Securities and Exchange Commission (SEC) in the United States?
To regulate the sale of securities and protect investors
ExplanationRegulatory body overseeing securities markets and ensuring investor protection.
#16
What is the difference between a mutual fund and an ETF?
ETFs can only be bought and sold at the end of the trading day, while mutual funds can be bought and sold throughout the day
ExplanationDifference in trading flexibility and structure between exchange-traded funds (ETFs) and mutual funds.
#17
What is the purpose of a will?
To specify how assets should be distributed after death
ExplanationLegal document outlining the distribution of assets after an individual's death.