#1
What is the formula for calculating compound interest?
A = P(1 + r)^t
ExplanationInterest compounded over time.
#2
What is the present value of $5000 to be received in 3 years with a 5% interest rate?
$4545.45
ExplanationPresent value of future cash flow discounted at given rate.
#3
Which of the following is NOT a type of risk associated with investments?
Dividend risk
ExplanationNot a common investment risk.
#4
What does the term 'Efficient Market Hypothesis' propose?
That markets are perfectly efficient and reflect all available information
ExplanationEfficiency of market information incorporation.
#5
In portfolio management, what is the purpose of the Markowitz Efficient Frontier?
To maximize the return for a given level of risk
ExplanationOptimal risk-return portfolio allocation.
#6
What is the standard deviation used for in investment analysis?
To measure the dispersion of returns
ExplanationIndicates variability of investment returns.
#7
What does the Sharpe Ratio measure?
Risk-adjusted return
ExplanationEvaluates return relative to its risk.
#8
In financial markets, what does the term 'Bid-Ask Spread' refer to?
The difference between the price at which a market maker is willing to buy and sell a security
ExplanationCost of trading a security.
#9
What is the purpose of the CAPM (Capital Asset Pricing Model) in finance?
To estimate the expected return of an asset
ExplanationDetermines expected return based on risk.
#10
Which of the following is NOT a characteristic of a normal distribution?
The mean, median, and mode are equal
ExplanationNot a property of a normal distribution.
#11
Which of the following is NOT a factor affecting the Black-Scholes option pricing model?
Market supply and demand
ExplanationNot directly influencing option pricing.
#12
What is the formula for calculating the internal rate of return (IRR) of an investment?
IRR = Rate at which NPV equals zero
ExplanationRate of return at which NPV of cash flows is zero.
#13
What is the formula for calculating the present value of an annuity?
PV = PMT * (1 - (1 + r)^-n) / r
ExplanationPresent value of series of cash flows.
#14
What is the formula for calculating the net present value (NPV) of an investment?
NPV = PV of Cash Inflows - PV of Cash Outflows
ExplanationPresent value of future cash flows minus initial investment.