#1
What is diversification in investment?
Spreading investments across different assets
ExplanationMinimizing risk by investing in various assets.
#2
What does ROI stand for in finance?
Return On Investment
ExplanationMeasurement of profitability relative to investment cost.
#3
What is the role of a financial advisor?
To provide investment advice
ExplanationGuidance on financial planning and investment strategies.
#4
What is the role of dividends in investment?
To provide a return to shareholders
ExplanationDistribution of profits to shareholders as a form of income.
#5
What is the concept of 'buy low, sell high' in investing?
Buying stocks at low prices and selling them at higher prices
ExplanationStrategy to profit from fluctuations in asset prices.
#6
What is the function of a stock exchange?
To facilitate trading of securities
ExplanationPlatform for buying and selling stocks and bonds.
#7
What is the Efficient Market Hypothesis (EMH) in finance?
It suggests that stock prices fully reflect all available information
ExplanationPrices reflect all available information, making it hard to outperform the market.
#8
What is the Capital Asset Pricing Model (CAPM) used for?
To determine the expected return on an investment
ExplanationEstimating the return on an investment relative to its risk.
#9
What does the P/E ratio indicate in finance?
Price to Earnings ratio
ExplanationRelation between a company's stock price and its earnings.
#10
What is the primary goal of portfolio management?
To maximize returns
ExplanationEfficiently balancing risk and return to achieve investment objectives.
#11
What is the significance of the Federal Reserve in the U.S. financial system?
It controls the money supply and interest rates
ExplanationRegulating monetary policy to stabilize the economy.
#12
What is the concept of 'time value of money'?
Money saved today is worth more than the same amount in the future
ExplanationThe value of money changes over time due to factors like inflation.