#1
2. What does ROI stand for in the context of investments?
Return on Investment
ExplanationMeasurement of investment profitability.
#2
7. What is the primary function of a Stock Exchange?
To facilitate the trading of financial instruments
ExplanationPlatform for buying and selling securities.
#3
18. What is the role of the Federal Reserve in the United States?
To regulate interest rates
ExplanationCentral bank responsible for monetary policy.
#4
1. What is the formula for calculating compound interest?
P * (1 + r/n)^nt
ExplanationFormula for compounding interest over time.
#5
4. In the context of investments, what does 'Diversification' mean?
Spreading investments across different assets
ExplanationReducing risk by investing in various assets.
#6
6. What does the term 'Yield' represent in the context of investments?
The return on investment expressed as a percentage
ExplanationMeasure of investment profitability.
#7
8. What is the concept of 'Present Value' in financial mathematics?
The current value of a future cash flow
ExplanationValue of future cash flows in today's terms.
#8
10. What is the purpose of a 'Stop-Loss' order in trading?
To limit potential losses by automatically selling an asset
ExplanationPrevent excessive losses by selling at a preset price.
#9
12. What is the difference between a bull market and a bear market?
A bull market is characterized by rising prices, while a bear market is characterized by falling prices
ExplanationMarket conditions indicating rising or falling prices.
#10
13. What does the term 'Coupon Rate' refer to in the context of bonds?
The annual interest rate paid by the issuer to the bondholder
ExplanationInterest rate on a bond.
#11
3. What is the Time Value of Money (TVM) principle?
Money loses value over time
ExplanationBasic financial principle accounting for inflation.
#12
5. What is the Capital Asset Pricing Model (CAPM) used for?
Evaluating investment opportunities
ExplanationAssessing the risk and return of assets.
#13
9. What does the term 'Liquidity' mean in the context of investments?
The ease of buying or selling an asset without affecting its price
ExplanationHow quickly an asset can be converted into cash.
#14
11. What is the rule of 72 used for in financial calculations?
Estimating the time it takes for an investment to double at a fixed annual rate
ExplanationQuick estimation of investment growth.
#15
14. What is the significance of the Efficient Market Hypothesis (EMH) in investment theory?
It proposes that it is impossible to consistently achieve higher-than-average returns
ExplanationTheory stating market prices reflect all available information.
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16. What is the concept of 'Beta' in the context of stock analysis?
The measure of a stock's volatility in relation to the market
ExplanationIndicator of a stock's volatility.
#17
20. What is the significance of the Sharpe Ratio in investment analysis?
It measures the risk-adjusted return of an investment
ExplanationAssesses risk-adjusted returns.