Investment Fundamentals and Risk Management Quiz
Test your knowledge on low-risk investments, Sharpe ratio, ETFs, options trading, and more with our risk management quiz.
#1
Which of the following is a low-risk investment?
Stocks
Government Bonds
Cryptocurrency
Real Estate
#2
Which of the following is a characteristic of a growth stock?
Pays high dividends
Experiences steady and predictable growth
Considered stable during market downturns
Tends to reinvest earnings for future growth
#3
What is the primary purpose of a 401(k) retirement account?
To provide life insurance coverage
To allow tax-free withdrawals for education expenses
To facilitate tax-advantaged retirement savings
To invest in high-risk assets for quick returns
#4
What does the term 'Diversification' refer to in the context of investing?
Putting all your money in one investment
Spreading investments across different assets
Investing only in technology stocks
Timing the market to maximize returns
#5
What is the Sharpe ratio used for in finance?
Measuring a portfolio's risk-adjusted return
Predicting future stock prices
Calculating the dividend yield
Assessing liquidity of an investment
#6
What is the primary purpose of an ETF (Exchange-Traded Fund)?
To provide loans to investors
To pool money from multiple investors and invest in a diversified portfolio
To facilitate direct trading of individual stocks
To offer fixed returns on investments
#7
In the context of bonds, what does the term 'Yield to Maturity' represent?
The annual interest rate paid by the bond
The total return anticipated on a bond if held until it matures
The face value of the bond
The current market price of the bond
#8
What is the role of a custodian in the context of investment management?
Providing investment advice to clients
Holding and safeguarding financial assets on behalf of clients
Executing buy and sell orders in the market
Managing a portfolio's risk exposure
#9
What is the concept of 'Beta' in the context of stocks?
The measure of a stock's sensitivity to market movements
The earnings per share of a company
The total market value of a company's outstanding shares
The cost of equity capital
#10
Which of the following risk management strategies involves setting a predetermined price to sell an asset?
Stop-Loss
Hedging
Options Trading
Short Selling
#11
What does the term 'Alpha' measure in the context of investment performance?
The percentage change in a stock's price
The risk-adjusted return of an investment
The correlation between two assets
The market value of a company
#12
What is the purpose of using the Modern Portfolio Theory (MPT) in investment?
To maximize returns without considering risk
To minimize risk without considering returns
To find the optimal portfolio that balances risk and return
To time the market for short-term gains
#13
In the context of options trading, what is a 'Put Option'?
A contract that gives the holder the right to buy an underlying asset at a specified price
A contract that gives the holder the right to sell an underlying asset at a specified price
A type of bond issued by the government
A security that represents ownership in a company
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