#1
Which of the following investment strategies aims to minimize risk by spreading investments across different asset classes?
Diversification
ExplanationMinimizes risk by spreading investments.
#2
What is the primary objective of value investing?
To buy undervalued assets
ExplanationFocuses on purchasing undervalued assets.
#3
Which of the following is NOT a common type of investment account?
Home Equity Line of Credit (HELOC)
ExplanationNot a common investment account type.
#4
What is the concept of 'dollar-cost averaging' in investment?
Investing a fixed amount of money at regular intervals, regardless of market conditions
ExplanationRegular fixed amount investments.
#5
What is the main goal of a 'buy-and-hold' investment strategy?
To invest in assets for the long term without frequent trading
ExplanationLong-term asset holding strategy.
#6
Which investment strategy involves buying and selling financial instruments within the same trading day?
Day trading
ExplanationInvolves same-day buying and selling.
#7
What does the acronym 'ETF' stand for in finance?
Exchange-Traded Fund
ExplanationExchange-Traded Fund.
#8
Which of the following is a characteristic of a 'bull market'?
Rising stock prices and optimistic investor sentiment
ExplanationCharacterized by rising stock prices.
#9
What does the 'Sharpe ratio' measure in finance?
Risk-adjusted return
ExplanationMeasures risk-adjusted returns.
#10
What does the term 'alpha' measure in investment?
The risk-adjusted performance of an investment
ExplanationMeasures risk-adjusted performance.
#11
In the context of investment, what does the term 'asset allocation' refer to?
The percentage of an investment portfolio allocated to different asset classes
ExplanationAllocation of portfolio across asset classes.
#12
In the context of investment, what does the term 'capital gains' refer to?
Profits generated from buying and selling assets
ExplanationProfits from asset sales.
#13
What is the purpose of a 'stop-loss order' in investment?
To limit losses by automatically selling a security if its price falls below a certain level
ExplanationLimits losses by automatic selling.
#14
What does the term 'volatility' refer to in investment?
The degree of variation in the price of an asset over time
ExplanationDegree of price variation over time.
#15
What does the term 'leverage' mean in the context of investment?
The use of borrowed funds to increase the potential return of an investment
ExplanationUses borrowed funds to increase returns.