#1
What does ROI stand for in investment?
Return on Investment
ExplanationMeasure of profitability in relation to the amount invested.
#2
Which of the following is a type of investment?
Certificate of deposit (CD)
ExplanationLow-risk investment with fixed interest rates.
#3
What is a bear market?
A market with declining stock prices
ExplanationPeriod of sustained market decline.
#4
What is the purpose of a stop-loss order in investing?
To sell a stock when it reaches a certain price to limit losses
ExplanationAutomated sell order to limit losses.
#5
What is the purpose of an emergency fund?
To cover unexpected expenses
ExplanationFinancial safety net for unforeseen costs.
#6
What is diversification in investment?
Investing in multiple asset classes
ExplanationSpreading investments to reduce risk.
#7
What is the concept of 'buying on margin' in investing?
Buying stocks with borrowed money
ExplanationUsing borrowed funds to invest in stocks.
#8
What is the purpose of a 401(k) retirement plan?
To save for retirement
ExplanationTax-advantaged retirement savings account.
#9
What is the difference between a stock and a bond?
Stocks represent ownership, while bonds represent debt
ExplanationStocks offer ownership in a company; bonds are loans to the issuer.
#10
What is the purpose of asset allocation in investment?
To minimize investment risk by spreading investments across different asset classes
ExplanationStrategy to balance risk and reward by diversifying investments.
#11
What is the 'time value of money'?
Money's potential to grow in value over time
ExplanationThe principle that money available today is worth more than the same amount in the future.
#12
What is the rule of 72 in finance?
It calculates how long it takes for an investment to double at a given interest rate
ExplanationSimple formula to estimate the time required for an investment to double in value.
#13
What is the difference between a mutual fund and an ETF?
Mutual funds are actively managed, while ETFs are passively managed
ExplanationMutual funds involve active management by a fund manager; ETFs track indexes passively.
#14
What is the concept of 'compounding' in finance?
Earning interest on interest
ExplanationProcess of generating earnings from previous earnings.
#15
What is the 'efficient market hypothesis'?
The theory that markets are always perfectly efficient and reflect all available information
ExplanationTheory suggesting it's impossible to consistently outperform the market.