#1
What does the term 'ROI' stand for in finance?
Return on Investment
ExplanationROI represents the profitability of an investment relative to its cost.
#2
Which of the following is NOT a type of financial market?
Labor Market
ExplanationLabor market is not a financial market; it deals with employment and wages.
#3
What is the primary function of a stock exchange?
To facilitate trading of stocks and securities
ExplanationStock exchanges provide a platform for buying and selling securities.
#4
Which of the following is a characteristic of a bull market?
Rising prices and investor optimism
ExplanationBull markets are marked by rising asset prices and positive investor sentiment.
#5
What is the difference between a stock and a bond?
Stocks represent ownership in a company, while bonds represent debt.
ExplanationStocks confer ownership, while bonds are loans to the issuer.
#6
What is the role of a financial intermediary?
To facilitate transactions between buyers and sellers of securities
ExplanationFinancial intermediaries connect investors with borrowers or other investors.
#7
Which of the following is a key factor affecting the demand for a currency in the foreign exchange market?
All of the above
ExplanationFactors like interest rates, economic stability, and geopolitical events influence currency demand.
#8
What does the term 'diversification' mean in investment?
Spreading investments across different assets
ExplanationDiversification involves investing in various asset classes to reduce risk.
#9
What is the concept of 'time value of money'?
The principle that a sum of money is worth more today than in the future
ExplanationMoney has greater value today due to its potential earning capacity over time.
#10
What is the Efficient Market Hypothesis (EMH)?
The theory that markets are always efficient and prices reflect all available information
ExplanationEMH posits that it's impossible to consistently outperform the market because prices reflect all known information.
#11
What is the concept of 'arbitrage' in financial markets?
The practice of buying and selling securities to take advantage of price differences in different markets
ExplanationArbitrage exploits price differentials between markets, ensuring prices align.
#12
What is a 'derivative' in financial markets?
A financial instrument that derives its value from an underlying asset
ExplanationDerivatives' values are derived from underlying assets like stocks, bonds, or commodities.