#1
What is the formula to calculate simple interest?
Principal × Rate × Time
ExplanationBasic formula for calculating interest based on principal, rate, and time.
#2
What does the term 'ROI' stand for in investment?
Return on Investment
ExplanationMeasure of profitability of an investment.
#3
Which of the following factors affects the calculation of compound interest?
All of the above
ExplanationVarious factors influencing the computation of compound interest.
#4
What is the concept of 'liquidity' in investment?
The ability to convert investments into cash quickly without significant loss of value
ExplanationEase with which investments can be converted into cash without substantial loss.
#5
What does the term 'APR' stand for in finance?
Annual Percentage Rate
ExplanationStandardized measure representing the yearly cost of borrowing.
#6
Which of the following best describes compound interest?
Interest calculated on the principal amount and also on the accumulated interest
ExplanationInterest accruing on both the initial investment and previously earned interest.
#7
What is the Rule of 72 used for in investment?
Estimating the time it takes for an investment to double at a fixed annual rate of return
ExplanationQuick estimation of how long it takes for an investment to double.
#8
What is the concept of diversification in investment?
Spreading investments across different asset classes to reduce risk
ExplanationStrategy of mitigating risk by investing in various asset types.
#9
What is the 'time value of money' principle in investment?
Money available now is worth more than the same amount in the future due to its potential earning capacity
ExplanationConcept stating the value of money decreases over time due to potential earnings.
#10
What is the difference between simple interest and compound interest?
Simple interest is calculated on the principal amount only, while compound interest is calculated on the principal amount and also on the accumulated interest
ExplanationDistinction between interest computed solely on the principal and that on both principal and accrued interest.
#11
What is the annualized return?
The return earned on an investment in a single year
ExplanationOverall return on investment computed for a single year.
#12
Which of the following investments typically carries the highest level of risk?
Stocks
ExplanationGenerally high-risk investments representing ownership in a company.