#1
Which of the following is a key component of an investment portfolio?
Risk-free asset
Blank check
Random variable
Fictional currency
#2
Which of the following is a characteristic of a growth stock?
High dividend yield
Stable and predictable earnings
Potential for high capital appreciation
Low price-to-earnings ratio
#3
What is the primary purpose of a bond in an investment portfolio?
To provide ownership stake in a company
To generate regular income through interest payments
To offer voting rights in shareholder meetings
To speculate on short-term price movements
#4
What is the primary purpose of an options contract in the financial markets?
To transfer ownership of a stock
To speculate on short-term price movements
To provide voting rights in shareholder meetings
To hedge against potential losses
#5
What is the role of a hedge fund in the financial markets?
Provide loans to individual investors
Actively manage a pool of investments to generate returns
Offer insurance against market downturns
Facilitate international trade transactions
#6
What does the term 'diversification' refer to in the context of investment portfolios?
Concentrating all investments in one asset
Spreading investments across different assets
Ignoring risk factors
Investing only in stocks
#7
Which financial ratio measures a company's ability to meet its short-term obligations?
Return on Investment (ROI)
Debt-to-Equity Ratio
Current Ratio
Earnings per Share (EPS)
#8
What does the Sharpe Ratio measure in the context of investment performance?
Volatility of an investment
Liquidity of an investment
Risk-adjusted return of an investment
Market capitalization of an investment
#9
In finance, what is the 'efficient frontier'?
A line representing optimal portfolios with the highest return for a given level of risk
A measure of market efficiency
A financial statement showing a company's profitability
A regulatory authority for financial markets
#10
Which investment strategy involves buying a diversified portfolio and holding it for the long term without active trading?
Day trading
Swing trading
Value investing
Buy and hold
#11
What is the primary objective of Modern Portfolio Theory (MPT)?
Maximize investment returns
Minimize investment risk
Eliminate taxes on investments
Predict stock prices accurately
#12
What does the term 'alpha' represent in the context of investment performance?
Measure of market risk
Excess return over a benchmark
Total value of a portfolio
Duration of investment
#13
What does the Capital Asset Pricing Model (CAPM) attempt to calculate?
The market risk premium
The total return on an investment
The cost of debt for a company
The intrinsic value of a stock
#14
What is the role of a 'stop-loss order' in investing?
To initiate a purchase of a stock
To sell a security when it reaches a specified price, limiting losses
To allocate funds in different asset classes
To increase the potential return on an investment
#15
What is the formula for calculating the compound annual growth rate (CAGR) of an investment?
(Ending Value - Beginning Value) / Number of Years
(Ending Value / Beginning Value) ^ (1 / Number of Years) - 1
Beginning Value * (1 + Annual Growth Rate) ^ Number of Years
Ending Value * (1 - Annual Growth Rate) ^ Number of Years