#1
Which of the following investments typically offers the highest potential return but also carries the highest risk?
Government bonds
Savings accounts
Stocks
Certificates of deposit (CDs)
#2
What is systematic risk?
Risk that affects only a specific company or industry.
Risk that is inherent to the entire market.
Risk associated with political events.
Risk arising from changes in interest rates.
#3
Which of the following is an example of unsystematic risk?
Market volatility
Interest rate risk
Economic recession
Company-specific lawsuit
#4
Which of the following is NOT a factor affecting investment risk?
Interest rates
Economic conditions
Investor's age
Market volatility
#5
Which of the following is a measure of investment return?
Standard deviation
Beta
Sharpe ratio
Alpha
#6
Which of the following is true regarding the risk-return tradeoff?
Higher risk is always associated with higher returns.
Higher risk is always associated with lower returns.
There is no relationship between risk and returns.
Lower risk is always associated with higher returns.
#7
What is beta in finance?
A measure of the volatility of an asset compared to the market.
The rate of return on a risk-free investment.
The percentage change in the market index.
The difference between the current price and the moving average.
#8
Which of the following is NOT a measure of investment risk?
Sharpe Ratio
Beta
Alpha
Earnings per Share (EPS)
#9
What does a negative alpha value indicate in financial analysis?
The investment is outperforming the market.
The investment is underperforming the market.
The investment carries no risk.
The investment has a low standard deviation.
#10
Which of the following statements is true regarding diversification?
Diversification reduces unsystematic risk but not systematic risk.
Diversification reduces systematic risk but not unsystematic risk.
Diversification eliminates all types of risk.
Diversification increases both systematic and unsystematic risk.
#11
What is the primary assumption of the Efficient Market Hypothesis (EMH)?
Investors always have access to perfect information.
Investors base their decisions solely on technical analysis.
Market prices reflect all available information.
Market prices are always stable and do not fluctuate.
#12
What is standard deviation in finance?
A measure of the average return on an investment.
A measure of the dispersion of returns around the average return.
The rate at which an investment grows over time.
The ratio of an investment's return to its risk.
#13
What is the Capital Asset Pricing Model (CAPM) used for?
To calculate the return of a portfolio.
To estimate the cost of equity.
To predict changes in interest rates.
To determine the value of a company's stock.
#14
What is the formula for calculating the Sharpe Ratio?
Annual return / Standard deviation
Risk-free rate / Beta
(Market return - Risk-free rate) / Beta
(Annual return - Risk-free rate) / Standard deviation
#15
What does the coefficient of variation measure in finance?
The extent of correlation between two assets.
The degree of diversification in a portfolio.
The risk per unit of return of an investment.
The relationship between stock price and earnings per share.
#16
What is the purpose of Monte Carlo simulation in risk analysis?
To estimate the probability of various outcomes in a decision process.
To determine the expected value of an investment.
To calculate the net present value of a project.
To assess the sensitivity of a financial model to changes in input variables.
#17
What does the Jensen's Alpha measure in finance?
The risk-adjusted return of an investment relative to a benchmark.
The ratio of systematic risk to total risk.
The volatility of an investment's returns.
The correlation between two assets.