#1
What is the primary goal of investment?
To generate income or increase value over time
ExplanationInvesting aims for wealth accumulation or income growth.
#2
What does the Price-to-Earnings (P/E) ratio indicate?
The current share price relative to its earnings per share
ExplanationP/E ratio compares stock price to its earnings per share, indicating valuation.
#3
What does the term 'market capitalization' refer to?
The total value of a company's outstanding shares of stock
ExplanationMarket capitalization gauges a company's value based on its stock price.
#4
What does a 'bull market' signify?
A market characterized by rising prices
ExplanationA bull market sees prolonged price increases across various asset classes.
#5
What does the term 'liquidity' refer to in the context of financial markets?
The ease with which an asset can be converted into cash without affecting its price
ExplanationLiquidity denotes an asset's ability to be quickly converted into cash.
#6
What is meant by 'portfolio diversification'?
The practice of spreading your investments across various sectors to minimize risk
ExplanationPortfolio diversification reduces risk by investing in different sectors.
#7
Which of the following is a fundamental analysis method used in investing?
Quantitative analysis
ExplanationQuantitative analysis scrutinizes financial data to evaluate investment opportunities.
#8
In the context of investment analysis, what does 'diversification' mean?
Spreading your investments across various asset classes to reduce risk
ExplanationDiversification mitigates risk by investing in different assets.
#9
Which of the following investment vehicles is considered the most liquid?
Stocks
ExplanationStocks are highly liquid, easily bought or sold on the market.
#10
What is the Beta coefficient used to measure in finance?
The volatility of a stock relative to the overall market
ExplanationBeta measures stock volatility compared to the market, aiding risk assessment.
#11
What strategy involves buying undervalued stocks that are expected to perform well in the future?
Value investing
ExplanationValue investing seeks stocks undervalued compared to their intrinsic worth.
#12
What is the Efficient Market Hypothesis (EMH)?
The theory that all information is already reflected in stock prices
ExplanationEMH suggests stock prices instantly reflect all available information.
#13
What is the Sharpe Ratio primarily used to measure?
The return of an investment compared to its risk
ExplanationSharpe Ratio assesses risk-adjusted returns, aiding in investment decisions.
#14
What is the main focus of 'technical analysis' in stock trading?
Price movements and trading volumes in the stock market
ExplanationTechnical analysis studies price movements and trading volumes for investment decisions.