#1
What does the term 'Blue Chip Stocks' refer to in the context of investment?
Stocks of well-established companies with a history of stable earnings
ExplanationShares of large, well-established companies with a track record of consistent financial performance.
#2
What is the primary function of a stock exchange?
To facilitate the trading of securities between buyers and sellers
ExplanationA platform where securities such as stocks and bonds are bought and sold by investors.
#3
Which of the following is a characteristic of a growth stock?
High potential for capital appreciation
ExplanationStocks of companies with strong growth prospects, often experiencing above-average increases in value.
#4
In the context of securities markets, what does the term 'Liquidity' refer to?
The ease of converting an asset into cash without affecting its market price
ExplanationThe ability to quickly convert an investment into cash without significantly affecting its price.
#5
What is the role of a stockbroker in securities trading?
To facilitate buying and selling of securities on behalf of clients
ExplanationAn intermediary who executes trades of securities on behalf of investors, often providing advice and research.
#6
What does the term 'IPO' stand for in the context of securities markets?
Initial Public Offering
ExplanationThe first sale of stock by a private company to the public, marking its transition into a publicly traded entity.
#7
Which of the following is considered a primary market transaction?
Buying shares of a newly issued IPO (Initial Public Offering)
ExplanationBuying shares directly from the issuing company at the time of their initial offering to the public.
#8
Which of the following is NOT a characteristic of a bond?
Ownership stake in the issuing company
ExplanationBonds represent debt, not ownership, and thus do not confer ownership rights in the issuing company.
#9
What is the role of a financial regulator in the securities market?
To ensure fair and transparent trading practices
ExplanationTo oversee and enforce regulations to maintain fairness, transparency, and stability in securities trading.
#10
What is the purpose of diversification in an investment portfolio?
To reduce risk by investing in a variety of assets
ExplanationSpreading investments across different asset classes to minimize the impact of a decline in any single investment.
#11
Which of the following is NOT a type of investment fund?
Stock index
ExplanationAn index representing a specific segment of the stock market, not an investment fund.
#12
What does the term 'Short Selling' mean in securities trading?
Selling a security that the seller does not own, with the intention of buying it back at a lower price
ExplanationSelling borrowed securities in anticipation of a price decline, with the aim of buying them back at a lower price to profit.
#13
What does the term 'Dividend Yield' indicate?
The annual dividend income per share divided by the stock's current market price
ExplanationA measure of the return on investment in a stock through dividends, expressed as a percentage of the current stock price.
#14
What is the significance of the Efficient Market Hypothesis (EMH) in finance?
It suggests that stock prices reflect all available information and are therefore impossible to predict consistently
ExplanationThe theory that asset prices reflect all available information, making it impossible to consistently outperform the market.
#15
What is the primary objective of an investor who follows a 'Value Investing' strategy?
To invest in undervalued assets with the expectation of long-term growth
ExplanationSeeking to identify and invest in assets trading at a price lower than their intrinsic value, with the expectation of future appreciation.
#16
Which of the following is NOT a factor that affects bond prices?
Earnings per share of the issuer
ExplanationWhile the financial health of the issuer may indirectly affect bond prices, earnings per share specifically do not directly impact bond prices.