#1
Which of the following is a characteristic of common stock?
Voting rights in the company
ExplanationOwnership stake in a company with voting privileges.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationMeasurement of profitability of an investment.
#3
Which of the following is a characteristic of a mutual fund?
Professionally managed
ExplanationInvestment fund managed by professionals.
#4
What is the main purpose of a 401(k) retirement plan?
To provide a tax-advantaged way to save for retirement
ExplanationTax-efficient retirement savings vehicle.
#5
What does the acronym ETF stand for in finance?
Exchange Traded Fund
ExplanationInvestment fund traded on stock exchanges.
#6
Which of the following is NOT a type of bond?
Equity bond
ExplanationBond representing ownership in a company, not a debt instrument.
#7
What is the primary function of a stock exchange?
To facilitate trading of stocks and other securities
ExplanationPlatform for buying and selling securities.
#8
What does P/E ratio stand for in finance?
Price/Earnings ratio
ExplanationMeasure of a company's valuation.
#9
What is the purpose of diversification in investment?
To minimize risk by spreading investments across various assets
ExplanationRisk reduction strategy by investing in different assets.
#10
Which of the following best defines 'capital budgeting'?
The process of evaluating and selecting long-term investment projects
ExplanationDecision-making process for long-term investments.
#11
What is the formula for calculating compound interest?
A = P(1 + r/n)^nt
ExplanationCalculation of investment growth over time with compound interest.
#12
What does the term 'liquidity' refer to in finance?
The ease of converting an asset into cash without significant loss
ExplanationAbility to quickly convert assets into cash without loss of value.
#13
What is the main characteristic of a callable bond?
The issuer has the right to redeem it before maturity
ExplanationIssuer's option to repurchase the bond before maturity.
#14
What does the term 'alpha' represent in investment analysis?
The excess return of an investment relative to the market
ExplanationMeasure of investment performance relative to the market.