Investment Vehicles and Financial Instruments Quiz
Challenge yourself with questions on stocks, bonds, ETFs, derivatives, and more. Assess your grasp of investment vehicles and financial tools.
#1
Which of the following is a type of fixed-income investment?
Stocks
Mutual funds
Bonds
Real estate
#2
What does ETF stand for?
Exchange Traded Fund
Electronic Transfer Funds
Equity Transfer Fund
Economic Trading Firm
#3
What is the primary goal of diversification in investment?
To increase potential returns
To reduce risk by spreading investments across different assets
To focus all investments in one asset class for simplicity
To minimize tax liabilities
#4
What is the primary function of a stock exchange?
To provide loans to corporations
To facilitate the buying and selling of stocks, bonds, and other securities
To regulate the financial industry
To provide financial advice to investors
#5
Which of the following is an example of a derivative instrument?
Corporate bond
Preferred stock
Futures contract
Municipal bond
#6
What is the function of a dividend in the context of stocks?
To provide voting rights in the company's decisions
To represent ownership in the company
To provide a portion of the company's profits to shareholders
To guarantee a fixed return on investment
#7
Which of the following investment vehicles typically offers the highest potential returns?
Savings accounts
Certificates of deposit (CDs)
Stocks
Government bonds
#8
What is a derivative?
A type of stock
A financial instrument whose value is derived from the value of an underlying asset
An investment only available to high net worth individuals
A type of bond
#9
What is the main characteristic of a money market fund?
High volatility
Long-term investment horizon
Low risk
Speculative investments
#10
Which of the following is NOT a type of alternative investment?
Private equity
Real estate investment trusts (REITs)
Stock options
Commodities
#11
What is the purpose of a call option?
To give the holder the right to sell an asset at a specified price within a specified period
To give the holder the right to buy an asset at a specified price within a specified period
To generate fixed income for the investor
To provide voting rights in a company's decisions
#12
Which of the following is a characteristic of a Roth IRA?
Contributions are tax-deductible
Earnings grow tax-free
Withdrawals are subject to penalties before age 59½
There is no limit on annual contributions
#13
What is the primary purpose of a hedge fund?
To provide low-risk investments for retirees
To pool money from investors and invest it in a variety of assets
To provide loans to small businesses
To offer tax advice to high net worth individuals
#14
What is the role of a custodian in investment?
To manage investment portfolios
To provide investment advice
To safeguard and administer financial assets on behalf of clients
To trade securities on behalf of investors
#15
What is the concept of 'time value of money' in finance?
The principle that the value of money increases over time
The idea that money should be spent as soon as it is earned
The concept that money available today is worth more than the same amount in the future
The practice of investing in time-sensitive markets
#16
What is the primary function of a central depository in financial markets?
To regulate financial markets
To provide investment advice to investors
To facilitate the settlement of trades by holding securities in electronic form
To issue government bonds
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