#1
Which of the following is a fundamental analysis tool used to evaluate a stock?
Price-to-earnings ratio (P/E ratio)
ExplanationEvaluates stock's price relative to its earnings.
#2
Which of the following is NOT a type of investment risk?
Dividend risk
ExplanationNot a recognized type of investment risk.
#3
What is the main objective of portfolio diversification?
Minimizing risk
ExplanationSpread risk across various investments.
#4
What is the main purpose of a stop-loss order?
To automatically sell an asset when its price falls below a specified level
ExplanationProtects against losses by selling at preset price.
#5
What is the main objective of technical analysis in investment?
To predict future price movements based on historical market data
ExplanationAnalyzing past market data to forecast future prices.
#6
What does the Efficient Market Hypothesis (EMH) suggest?
Stock prices reflect all available information
ExplanationMarket prices quickly reflect all available information.
#7
Which investment strategy aims to maintain a balanced portfolio through periodic rebalancing?
Asset allocation
ExplanationBalances investments to manage risk and returns.
#8
What does the Capital Asset Pricing Model (CAPM) measure?
Expected return of an investment
ExplanationCalculates expected return based on risk.
#9
In the context of investment, what does the acronym IPO stand for?
Initial Public Offering
ExplanationFirst sale of stock by a company to the public.
#10
What is the primary objective of fundamental analysis in investment?
To analyze the intrinsic value of a security
ExplanationAssessing stock's true value based on fundamentals.
#11
What is the Sharpe ratio used to measure?
Risk-adjusted return
ExplanationEvaluates return relative to risk taken.
#12
Which investment vehicle typically offers the highest potential return but also carries the highest level of risk?
Derivatives
ExplanationHigh risk and high potential return financial instruments.
#13
Which of the following is a key characteristic of a growth stock?
High potential for future earnings growth
ExplanationFocus on future earnings growth over dividends.
#14
What does the term 'alpha' refer to in investment analysis?
The return generated by an investment relative to the market index
ExplanationMeasure of investment's excess return over market.
#15
Which of the following is NOT considered a factor in the Modern Portfolio Theory (MPT)?
Market liquidity
ExplanationNot a factor affecting portfolio construction in MPT.