#1
Which of the following is a type of investment vehicle?
Savings account
ExplanationA common deposit account offering interest and safety for funds.
#2
What is the primary purpose of a mutual fund?
To pool money from investors and invest in a diversified portfolio
ExplanationTo spread risk by investing in a variety of assets.
#3
Which of the following is NOT a type of alternative investment?
Stocks
ExplanationStocks are traditional equity investments.
#4
Which of the following statements is true about bonds?
Bonds are debt instruments issued by corporations or governments
ExplanationRepresent loans to entities, providing regular interest payments.
#5
What is the primary difference between a stock and a bond?
Stocks represent ownership in a company, while bonds represent a loan to a company or government
ExplanationStocks convey ownership, bonds represent debt.
#6
What is the concept of 'buy low, sell high' commonly associated with in investment?
Value investing
ExplanationPurchasing undervalued assets for later profit.
#7
Which of the following is not a characteristic of Exchange-Traded Funds (ETFs)?
Can only be bought and sold at the end of the trading day
ExplanationETFs can be bought and sold throughout the trading day like stocks.
#8
What is a hedge fund?
A private investment fund that employs various strategies to earn returns for its investors
ExplanationUtilizes diverse strategies for potentially high returns.
#9
What is a Real Estate Investment Trust (REIT)?
A company that invests in real estate and typically offers high dividends to investors
ExplanationInvests in real estate properties and distributes profits to shareholders.
#10
What is the main advantage of investing in a tax-deferred retirement account such as a 401(k) or an IRA?
Tax benefits such as tax-deferred growth or tax deductions
ExplanationDeferred taxation on contributions and growth.
#11
In the context of investments, what does the term 'liquidity' refer to?
The ability to quickly buy and sell an asset without significantly affecting its price
ExplanationEase of converting an asset to cash without impacting its value.
#12
What is the main difference between a traditional IRA and a Roth IRA?
Contributions to a traditional IRA are tax-deductible, while contributions to a Roth IRA are not tax-deductible
ExplanationTax treatment of contributions and withdrawals differs.
#13
Which of the following is a characteristic of a closed-end fund?
Limited number of shares outstanding
ExplanationA fixed number of shares traded on secondary markets.
#14
What is a Derivative?
A financial contract whose value is derived from the performance of an underlying asset
ExplanationValue is based on the price movements of another asset.
#15
Which of the following is NOT a characteristic of a money market fund?
Offers a high rate of return
ExplanationTypically offers lower returns but emphasizes stability.