#1
2. Which financial instrument represents ownership in a company?
Stock
ExplanationOwnership share in a corporation.
#2
5. In options trading, what does 'in-the-money' mean?
Option has intrinsic value
ExplanationOption's strike price favorable for exercise.
#3
14. In the context of bonds, what does 'Coupon Rate' represent?
The annual interest payment as a percentage of the bond's face value
ExplanationFixed annual interest payment on a bond.
#4
15. What is the formula for the Future Value of a single sum?
PV * (1 + r)^t
ExplanationValue of an investment at a future date.
#5
22. What does the term 'Time Value of Money' (TVM) refer to in finance?
The idea that money has a different value over time
ExplanationConcept that money available today is worth more than the same amount in the future.
#6
1. What is the formula for calculating compound interest?
P * (1 + r/n)^(nt)
ExplanationFormula for calculating interest on an initial amount compounded over time.
#7
4. What does the term 'Yield to Maturity (YTM)' represent?
Total return anticipated on a bond
ExplanationExpected total return on a bond if held until maturity.
#8
6. What is the formula for the Price-to-Earnings (P/E) ratio?
Market Price / Earnings per Share
ExplanationIndicator of a company's valuation.
#9
8. What is the purpose of a financial derivative?
To speculate on the future price movements of assets
ExplanationInstrument whose value derives from an underlying asset.
#10
12. What is the primary purpose of the Capital Asset Pricing Model (CAPM)?
To estimate the expected return on an investment
ExplanationModel for calculating expected returns based on risk.
#11
3. What is the Black-Scholes model used for in finance?
Valuing options
ExplanationModel for pricing options contracts.
#12
7. What does the term 'Arbitrage' refer to in financial markets?
Buying and selling securities to profit from price differences
ExplanationExploiting price inefficiencies for profit.
#13
9. How is the Net Present Value (NPV) calculated?
Sum of discounted cash flows
ExplanationPresent value of future cash flows minus initial investment.
#14
10. What is the primary purpose of the Efficient Market Hypothesis (EMH)?
To suggest that prices already incorporate and reflect all relevant information
ExplanationTheory asserting market efficiency in pricing assets.
#15
11. What is the formula for the Sharpe Ratio?
Risk-Free Rate / Standard Deviation of Portfolio Returns
ExplanationMeasure of risk-adjusted return.