#1
Which of the following is not a type of investment?
Liabilities
ExplanationLiabilities are obligations, not investments.
#2
What does ROI stand for in finance?
Return on Investment
ExplanationROI measures the profitability of an investment relative to its cost.
#3
What does the term 'asset allocation' refer to in financial planning?
The distribution of investments across different asset classes
ExplanationIt's about spreading investments across various categories.
#4
What is the primary purpose of a 401(k) retirement account?
To allow tax-deferred saving for retirement
Explanation401(k)s provide a tax-advantaged way to save for retirement.
#5
What is the time value of money (TVM) concept in finance?
The concept that money has different values at different points in time
ExplanationIt acknowledges that a dollar today is worth more than a dollar in the future.
#6
Which of the following is a characteristic of a growth investment strategy?
Investing in high-growth potential assets
ExplanationGrowth strategies seek capital appreciation over time.
#7
What is the concept of 'asset class' in investment?
A category of investment characterized by a similar risk-return profile
ExplanationAsset classes group investments by shared characteristics.
#8
Which of the following is a characteristic of a conservative investment strategy?
Emphasis on capital preservation
ExplanationConservative strategies focus on protecting invested capital.
#9
What is the 'Rule of 72' used for in financial planning?
Estimating the number of years for an investment to double at a given interest rate
ExplanationIt's a quick way to estimate investment growth over time.
#10
What is a 'bear market' in finance?
A market condition where the prices of securities are declining
ExplanationBear markets see falling prices and investor pessimism.
#11
What is the concept of 'dollar-cost averaging' in investment?
Investing a fixed amount of money at regular intervals regardless of market conditions
ExplanationIt's a strategy to reduce the impact of market volatility.
#12
What does the acronym ETF stand for in the context of investment?
Exchange-Traded Fund
ExplanationETFs are investment funds traded on stock exchanges.
#13
What is the main goal of tax-loss harvesting in investment?
To minimize capital gains taxes
ExplanationIt involves selling investments at a loss to offset gains and reduce taxes.
#14
Which of the following is a characteristic of a balanced investment strategy?
Diversification across multiple asset classes
ExplanationBalanced strategies combine growth and income investments.
#15
Which of the following is a potential benefit of diversification in investment portfolios?
Reduced risk
ExplanationDiversification spreads risk across different assets.
#16
What is the role of a financial advisor in investment planning?
To provide personalized financial advice and help clients meet their financial goals
ExplanationAdvisors assist in crafting strategies tailored to individual needs.
#17
What is the concept of 'buy-and-hold' strategy in investing?
Holding onto investments for an extended period without frequent trading
ExplanationIt advocates holding investments for the long term.
#18
What is the concept of 'alpha' in investment performance evaluation?
The measure of risk-adjusted return compared to a benchmark index
ExplanationAlpha indicates investment performance relative to a market index.
#19
What is the role of asset allocation in investment portfolio management?
To diversify investments across different asset classes to manage risk
ExplanationAsset allocation helps balance risk and return by spreading investments across diverse categories.