#1
Which of the following is NOT a characteristic of common stock?
Priority in bankruptcy
ExplanationCommon stock does not have priority in bankruptcy proceedings.
#2
What is the function of a bond?
To facilitate borrowing for governments and corporations
ExplanationBonds are debt instruments used by governments and corporations to raise funds.
#3
What is the role of a stock exchange?
To facilitate the buying and selling of securities
ExplanationStock exchanges provide a platform for trading securities.
#4
What is the primary goal of portfolio diversification?
To minimize risk
ExplanationPortfolio diversification aims to reduce risk by spreading investments across different assets.
#5
Which of the following is a characteristic of a growth stock?
Potential for high capital gains
ExplanationGrowth stocks are associated with the potential for significant capital appreciation.
#6
What does the Efficient Market Hypothesis (EMH) suggest?
Market prices reflect all available information
ExplanationEMH posits that market prices incorporate all publicly available information.
#7
What does 'PEG ratio' measure in relation to a stock?
Price-to-Earnings Growth ratio
ExplanationPEG ratio assesses a stock's valuation relative to its earnings growth rate.
#8
What is the primary function of a mutual fund?
To pool money from investors and invest in a diversified portfolio
ExplanationMutual funds collect funds from investors to invest in various assets for diversification.
#9
What does the term 'liquidity' refer to in financial markets?
The ability to easily convert an asset into cash without affecting its price
ExplanationLiquidity denotes the ease of converting assets into cash without significant price impact.
#10
What is the difference between stocks and bonds?
Stocks represent ownership in a company, while bonds represent debt
ExplanationStocks confer ownership rights in a company, whereas bonds represent debt obligations.
#11
Which of the following is a characteristic of a well-diversified portfolio?
Low correlation among investments
ExplanationA well-diversified portfolio comprises investments with low correlation to minimize risk.
#12
Which of the following factors affect bond prices?
All of the above
ExplanationVarious factors including interest rates, credit rating, and market conditions influence bond prices.