#1
What is the role of a stockbroker in financial markets?
Facilitating the buying and selling of securities on behalf of clients
ExplanationIntermediary for securities transactions.
#2
In the context of bonds, what does the term 'coupon rate' refer to?
The interest rate paid by the issuer on the face value of the bond
ExplanationInterest rate on bond's face value.
#3
What is the term for the market condition where there is a sustained decrease in the general price level of goods and services?
Deflation
ExplanationPersistent decrease in prices.
#4
What is the primary goal of portfolio diversification?
Minimizing risk by investing in a variety of assets
ExplanationRisk reduction through asset variety.
#5
What does the term 'liquidity' refer to in financial markets?
The ease with which an asset can be bought or sold in the market without affecting its price
ExplanationAsset's marketability without price impact.
#6
What is the significance of the Dow Jones Industrial Average (DJIA) in financial markets?
It tracks the average performance of 30 large, publicly-owned companies in the U.S.
ExplanationU.S. 30 large companies' performance gauge.
#7
Which of the following is considered a primary market transaction?
Buying a bond directly from the issuing company
ExplanationDirect purchase from the issuer.
#8
What does the term 'dividend yield' represent?
The annual dividend income relative to the stock's current market price
ExplanationDividend income ratio.
#9
What is the primary function of a mutual fund?
Pooling funds from investors to invest in a diversified portfolio
ExplanationCollective investment in diversified assets.
#10
In options trading, what does the term 'strike price' refer to?
The price at which the option can be exercised
ExplanationOption's exercise price.
#11
What is the role of a central bank in monetary policy?
Controlling inflation and stabilizing the currency
ExplanationInflation and currency stability.
#12
In the context of real estate, what is the term for the income generated by a property after deducting operating expenses?
Net income
ExplanationProfit after expenses.
#13
Which of the following is a measure of systematic risk in an investment portfolio?
Beta
ExplanationIndicator of market sensitivity.
#14
What is the significance of the Efficient Market Hypothesis (EMH) in financial markets?
It suggests that markets are always perfectly efficient and prices reflect all available information.
ExplanationMarket efficiency theory.
#15
What is the primary purpose of credit rating agencies in financial markets?
Evaluating the creditworthiness of borrowers and debt instruments
ExplanationAssessing borrower and debt reliability.
#16
What is the purpose of a stop-loss order in stock trading?
To automatically sell a security when its price reaches a specified level, limiting potential losses
ExplanationAutomatic security sale for loss prevention.
#17
What is the primary purpose of a 401(k) retirement account?
Saving for retirement through tax-advantaged contributions
ExplanationTax-favored retirement savings.