Investment Fundamentals and Financial Terminology Quiz

Explore investment basics and financial terminology with 11 quiz questions. Learn about ROI, ETFs, bonds, P/E ratio, liquidity, and more.

Practice Learn Test

What is the definition of ROI (Return on Investment)?

The total amount of money invested

The ratio of net profit to cost of investment

The time it takes for an investment to double

The rate at which an investment depreciates

What does the acronym ETF stand for?

Electronic Trading Fund

Exchange-Traded Fund

Equity Transaction Fee

Economic Task Force

What is the role of a financial advisor?

To provide investment advice and financial planning services

To manage a company's marketing strategies

To conduct market research and analysis

To regulate financial transactions

What is a blue-chip stock?

A stock with a low market capitalization

A stock from a well-established and financially sound company

A stock that is traded on a foreign exchange

A stock with high volatility

What is the function of a bond in investment?

To represent ownership in a company

To provide regular interest payments

To grant voting rights to shareholders

To offer high potential returns

What is the 'Rule of 72' used for in finance?

To calculate the time it takes for an investment to double

To determine the percentage change in stock prices

To forecast future inflation rates

To estimate tax deductions

What is the difference between a mutual fund and an index fund?

Mutual funds are actively managed, while index funds are passively managed

Mutual funds have lower fees than index funds

Index funds invest only in stocks, while mutual funds invest in a variety of assets

Index funds have a higher potential return than mutual funds

What is the significance of the P/E ratio in stock analysis?

It indicates the total profit of a company

It measures a stock's price relative to its earnings per share

It reflects the total assets of a company

It measures the volatility of a stock

What does the term 'liquidity' refer to in finance?

The ease with which an asset can be bought or sold without affecting its price

The ability of a company to generate profits

The risk associated with an investment

The long-term stability of an investment

#10

What is the role of the Securities and Exchange Commission (SEC) in the United States?

To regulate the stock exchanges

To oversee the issuance and trading of securities

To manage the national debt

To enforce antitrust laws

#11

What is the term for the process of spreading investments across various assets to reduce risk?

Diversification

Consolidation

Concentration

Amalgamation