#1
Which of the following is a common investment vehicle for retirement savings?
401(k)
ExplanationRetirement savings account with tax advantages.
#2
What is the purpose of diversification in an investment portfolio?
To minimize risk
ExplanationSpreading investments to reduce exposure to any single asset.
#3
Which of the following factors influences the risk tolerance of an investor?
Age
ExplanationDetermines willingness to accept risk in investments.
#4
What is the primary goal of investment diversification?
To minimize risk
ExplanationReducing risk by spreading investments across various assets.
#5
Which of the following is a characteristic of a bear market?
Declining stock prices
ExplanationPeriod of falling stock prices and investor pessimism.
#6
What is the primary purpose of asset allocation in investment?
Minimizing risk
ExplanationStrategy to spread investments for risk management.
#7
Which of the following is considered a leading indicator of a country's economic health?
Gross Domestic Product (GDP)
ExplanationTotal value of goods and services produced within a country.
#8
Which of the following is a measure of an investment's volatility?
Beta
ExplanationIndicates the sensitivity of an investment's return to market changes.
#9
What is the role of a financial planner?
Creating long-term financial plans
ExplanationDeveloping strategies for achieving financial goals.
#10
What is the purpose of a budget in financial planning?
To track income and expenses
ExplanationMonitoring and managing financial inflows and outflows.
#11
What is the primary difference between stocks and bonds?
Stocks represent ownership, while bonds represent debt
ExplanationStocks signify ownership in a company; bonds are loans to entities.
#12
What does the term 'liquidity' refer to in finance?
The ability to convert assets into cash quickly without significant loss of value
ExplanationEase of converting assets into cash without substantial loss.
#13
What does the term 'alpha' represent in investment analysis?
The risk-adjusted return
ExplanationReturn on investment considering its risk.
#14
What is the formula for calculating the present value of a future cash flow?
PV = FV / (1 + r)^n
ExplanationDetermining today's value of a future cash flow.
#15
Which of the following statements best describes the time value of money?
Money has more value in the future than it does today
ExplanationConcept that money today is worth more than the same amount in the future.
#16
What is the formula for calculating compound interest?
A = P(1 + r/n)^(nt)
ExplanationCalculating interest on initial principal and accumulated interest.
#17
What is the purpose of a risk assessment in financial planning?
To minimize investment risk
ExplanationIdentifying and mitigating potential risks in investments.
#18
Which of the following is a characteristic of a growth stock?
High potential for capital appreciation
ExplanationStocks expected to increase in value rapidly.
#19
What does the term 'inflation' refer to in economics?
The increase in the general price level of goods and services
ExplanationRise in overall price levels resulting in decreased purchasing power.