#1
What is the primary function of a stock exchange?
To facilitate buying and selling of securities
ExplanationFacilitates trading of financial instruments.
#2
What is the purpose of a 'bull market' in financial terms?
A market characterized by rising prices and positive investor sentiment
ExplanationPeriod of optimism and rising asset prices.
#3
What is the primary function of a central bank in a country's financial system?
Issuing currency and controlling monetary policy
ExplanationRegulates money supply and interest rates.
#4
What is the purpose of a futures contract in financial markets?
To buy or sell an asset at a predetermined price on a future date
ExplanationAgreement for future transaction at set price.
#5
What does the term 'liquidity' mean in the context of financial markets?
The ease with which an asset can be quickly bought or sold without affecting its price
ExplanationMarketability and ease of trading an asset.
#6
Which financial instrument represents a loan made by an investor to a government or corporation?
Bond
ExplanationDebt instrument representing a loan.
#7
What does the term 'IPO' stand for in the context of financial markets?
Initial Public Offering
ExplanationFirst sale of stock by a private company to the public.
#8
In the context of investment, what does the acronym ROI stand for?
Return on Investment
ExplanationMeasure of profitability of an investment.
#9
Which financial term refers to a measure of a company's profitability, calculated as net income divided by shareholder equity?
Return on Equity (ROE)
ExplanationIndicator of company's efficiency.
#10
Which of the following is a characteristic of a mutual fund?
Managed by a fund manager
ExplanationPooled investment managed by professionals.
#11
What does the term 'blue-chip stocks' refer to in the stock market?
Stocks of well-established and financially stable companies
ExplanationShares of reputable companies.
#12
What is the role of an investment bank in the financial market?
Facilitating mergers and acquisitions
ExplanationAssists in corporate restructuring and finance.
#13
Which financial term refers to the measure of how much an investment's return fluctuates over a period?
Beta
ExplanationIndicates volatility of an asset.
#14
What is the function of a 'stop-loss order' in trading?
To automatically sell a security when its price falls to a certain level
ExplanationMinimizes loss by selling at preset price.
#15
What does the term 'asset allocation' refer to in the context of investment portfolios?
Determining the mix of different asset classes in a portfolio
ExplanationStrategy to diversify investments.
#16
In the context of options trading, what is the 'strike price' of an option?
The price at which the underlying asset can be bought or sold
ExplanationPredetermined price for buying or selling.
#17
What is the significance of the Efficient Market Hypothesis (EMH) in finance?
It states that it is impossible to beat the market consistently
ExplanationAsserts market efficiency.