Introduction to Investments Practice Exam

Introduction to Investments Practice Exam

 

1. Which of the following is a characteristic of a stock?
   A. It represents a loan to the company
   B. It entitles the holder to a fixed interest payment
   C. It represents ownership in a company
   D. It guarantees a dividend payment

 

2. What does a bondholder receive from the issuer of a bond?
   A. Ownership rights in the company
   B. Regular interest payments and the return of principal at maturity
   C. Only dividend payments
   D. Voting rights at shareholder meetings

 

3. Which investment vehicle allows for diversification by pooling funds from multiple investors?
   A. Individual stocks
   B. Bonds
   C. Mutual funds
   D. Treasury bills

 

4. An ETF (Exchange-Traded Fund) is similar to a mutual fund in that it:
   A. Can be traded like a stock on exchanges
   B. Offers a fixed return
   C. Is actively managed
   D. Is only available to institutional investors

 

5. The primary difference between stocks and bonds is that:
   A. Stocks pay dividends, while bonds pay interest
   B. Bonds offer higher risk than stocks
   C. Bonds represent ownership, while stocks represent loans
   D. Stocks can be sold easily, while bonds are illiquid

 

6. Portfolio theory primarily deals with:
   A. The prediction of stock prices
   B. The allocation of assets to maximize return for a given level of risk
   C. The selection of the best performing mutual funds
   D. The analysis of a single stock’s performance

 

7. What is the main objective of diversification in portfolio management?
   A. To maximize risk
   B. To minimize risk by spreading investments across various assets
   C. To focus all investments in a single asset class
   D. To maximize returns at all costs

 

8. Which of the following is an example of a fixed-income security?
   A. Common stock
   B. Corporate bond
   C. Real estate investment trust (REIT)
   D. Mutual fund

 

9. A portfolio’s beta is used to measure:
   A. The total value of the portfolio
   B. The level of risk compared to the market as a whole
   C. The historical performance of the portfolio
   D. The dividend yield of the portfolio

 

10. Which of the following would typically be considered the safest investment?
    A. Common stock
    B. Corporate bonds
    C. U.S. Treasury bonds
    D. Exchange-traded funds (ETFs)

 

11. Which of the following is NOT typically a characteristic of mutual funds?
    A. Actively managed portfolios
    B. Diversification
    C. Fixed returns
    D. Pooling of investor funds

 

12. The price of an ETF is determined by:
    A. The company issuing the ETF
    B. The market value of the assets in the ETF
    C. The average price of stocks in the ETF
    D. The yield of the ETF

 

13. What is the main goal of technical analysis in investing?
    A. To identify trends and forecast future price movements
    B. To evaluate a company’s financial statements
    C. To assess a stock’s dividends
    D. To analyze macroeconomic trends

 

14. Which of the following best describes a mutual fund’s expense ratio?
    A. The percentage of assets that the fund charges for management and operating costs
    B. The amount a mutual fund pays out in dividends
    C. The total value of assets held in the fund
    D. The return of the fund compared to the market

 

15. Which of the following is true about bonds?
    A. Bonds are typically riskier than stocks
    B. Bonds pay regular interest payments, known as coupons
    C. Bonds offer ownership in a company
    D. Bonds are not affected by interest rates

 

16. What does a portfolio with a low correlation to the stock market typically offer?
    A. Higher returns with higher risk
    B. Diversification benefits by reducing overall risk
    C. Higher risk but lower returns
    D. Correlation to interest rates

 

17. In a well-diversified portfolio, an investor might hold:
    A. Only stocks from one industry
    B. A mix of stocks, bonds, and other asset classes
    C. Bonds from a single issuer
    D. Only government securities

 

18. What does “liquidity” mean in the context of investments?
    A. The ease with which an asset can be converted into cash
    B. The potential for an asset to increase in value
    C. The risk associated with holding an asset
    D. The amount of dividends paid by an asset

 

19. Which of the following is NOT typically a type of bond?
    A. Treasury bond
    B. Corporate bond
    C. Municipal bond
    D. Dividend bond

 

20. A company’s stock price is most directly affected by:
    A. The company’s revenue growth
    B. The company’s credit rating
    C. Changes in interest rates
    D. The volume of shares traded

 

21. Which type of investment fund is traded on an exchange like a stock?
    A. Hedge fund
    B. Mutual fund
    C. ETF (Exchange-Traded Fund)
    D. Private equity fund

 

22. The concept of “market efficiency” suggests that:
    A. Stock prices always reflect all available information
    B. Investors can consistently outperform the market
    C. Stock prices do not reflect fundamental data
    D. Diversification does not reduce risk

 

23. A high yield bond is often referred to as a:
    A. Junk bond
    B. Government bond
    C. Investment-grade bond
    D. Corporate bond

 

24. The risk of a portfolio is determined by:
    A. The total number of stocks in the portfolio
    B. The expected returns of each asset
    C. The correlation between the assets in the portfolio
    D. The type of bonds in the portfolio

 

25. Which of the following best describes an index fund?
    A. A fund that actively selects stocks to outperform the market
    B. A fund that tracks a specific market index, like the S&P 500
    C. A fund that invests only in government bonds
    D. A fund with a high turnover rate of securities

 

26. A bond’s yield is primarily determined by:
    A. The coupon rate and the current market price of the bond
    B. The bond’s maturity date
    C. The issuing company’s stock price
    D. The interest rate set by the Federal Reserve

 

27. Which of the following is a primary function of a mutual fund manager?
    A. To evaluate individual bonds for the fund
    B. To set the fund’s interest rates
    C. To actively manage and select the securities held in the fund
    D. To guarantee a fixed return to investors

 

28. What is the primary purpose of a company issuing shares of stock?
    A. To repay debt
    B. To raise capital for expansion and operations
    C. To avoid paying taxes
    D. To pay off bonds

 

29. In the context of investments, what does “capital gain” refer to?
    A. The income from dividends paid by an asset
    B. The increase in the value of an asset when sold for a profit
    C. The interest earned on a bond
    D. The principal amount of a bond

 

30. Which of the following is a potential disadvantage of investing in mutual funds?
    A. Lack of diversification
    B. High management fees
    C. Greater risk than individual stocks
    D. No professional management

 

 

31. Which of the following is a benefit of investing in mutual funds?
    A. Guaranteed returns
    B. Professional management and diversification
    C. No risk involved
    D. Fixed income payouts

 

32. What does the term “bull market” refer to?
    A. A market in which asset prices are declining
    B. A market with low trading volumes
    C. A market in which asset prices are rising
    D. A market that only includes government bonds

 

33. What is the primary risk associated with investing in stocks?
    A. Interest rate risk
    B. Credit risk
    C. Market risk
    D. Liquidity risk

 

34. What is the expected return of a portfolio calculated based on?
    A. The sum of the stock prices
    B. The weighted average of the returns of individual assets
    C. The average return of the market
    D. The correlation between stocks in the portfolio

 

35. Which of the following investment vehicles typically offers the highest risk and return?
    A. Bonds
    B. Stocks
    C. Treasury bills
    D. Certificates of deposit

 

36. Which of the following is NOT a characteristic of a preferred stock?
    A. Priority over common stock in dividend payments
    B. The ability to vote on corporate matters
    C. Typically higher dividends than common stock
    D. Usually does not have voting rights

 

37. What is the relationship between bond prices and interest rates?
    A. They are positively correlated
    B. They are negatively correlated
    C. Bond prices do not change with interest rates
    D. Bond prices increase as interest rates rise

 

38. What type of portfolio would most likely be recommended for a risk-averse investor?
    A. A portfolio consisting mainly of stocks
    B. A portfolio heavily weighted in government bonds and blue-chip stocks
    C. A portfolio focusing on high-yield bonds
    D. A portfolio with high exposure to emerging markets

 

39. The term “face value” of a bond refers to:
    A. The market value of the bond when it is sold
    B. The amount the bondholder will receive at maturity
    C. The coupon rate of the bond
    D. The interest rate set by the Federal Reserve

 

40. What does “systematic risk” refer to in portfolio management?
    A. The risk that can be diversified away
    B. The risk that affects only individual securities
    C. The risk related to market-wide factors such as economic recessions
    D. The risk associated with interest rate changes

 

41. Which of the following is a key difference between a mutual fund and an ETF?
    A. Mutual funds are actively traded, while ETFs are passively managed
    B. Mutual funds are bought and sold at the end of the trading day, while ETFs are traded throughout the day
    C. Mutual funds are not diversified, while ETFs are highly diversified
    D. ETFs are only available to institutional investors, while mutual funds are available to individual investors

 

42. The price of a stock is primarily influenced by:
    A. The supply and demand for the stock
    B. The price of related bonds
    C. The company’s fixed assets
    D. The number of shares outstanding

 

43. What is an example of a non-systematic risk?
    A. Interest rate fluctuations
    B. Economic downturns
    C. A company’s management making poor decisions
    D. Changes in inflation

 

44. A portfolio with a 0.5 correlation to the stock market will likely:
    A. Move in the same direction as the market
    B. Not move at all in relation to the market
    C. Be more volatile than the market
    D. Move in the opposite direction of the market

 

45. What is a major advantage of investing in international stocks?
    A. Reduced overall portfolio risk through diversification
    B. Guaranteed high returns
    C. Tax-free income
    D. Complete protection against domestic economic downturns

 

46. Which of the following is typically the least volatile asset?
    A. Small-cap stocks
    B. Large-cap stocks
    C. Government bonds
    D. Commodities

 

47. Which type of investment is typically issued by the government?
    A. Mutual funds
    B. Stocks
    C. Treasury bills
    D. Real estate investment trusts (REITs)

 

48. The Sharpe ratio is used to:
    A. Measure the total return of a portfolio
    B. Evaluate the risk-adjusted return of a portfolio
    C. Compare the performance of a stock to the market
    D. Calculate the bond yield

 

49. What is the main purpose of a bond’s coupon rate?
    A. To determine the bond’s market price
    B. To calculate the yield to maturity
    C. To indicate the interest payments the bondholder will receive
    D. To calculate the total return of the bond

 

50. Which of the following is an example of a derivative?
    A. Common stock
    B. Bond
    C. Call option
    D. Treasury bill

 

51. Which of the following best describes a “growth stock”?
    A. A stock that pays high dividends
    B. A stock with high volatility and limited potential for capital appreciation
    C. A stock that has potential for significant price appreciation but does not pay dividends
    D. A stock that is highly resistant to market fluctuations

 

52. The “price-to-earnings ratio” (P/E ratio) is used to measure:
    A. The total market value of a company
    B. The company’s profitability
    C. The relationship between the stock price and its earnings
    D. The company’s dividend payout ratio

 

53. The “risk-free rate” of return is typically represented by the yield on:
    A. Corporate bonds
    B. Stocks
    C. Treasury bills
    D. Real estate investments

 

54. Which of the following is true regarding real estate investment trusts (REITs)?
    A. They invest only in government bonds
    B. They provide an easy way for investors to invest in real estate markets without owning property directly
    C. They are only available to institutional investors
    D. They offer guaranteed rental income

 

55. Which of the following would be considered a “defensive stock”?
    A. A technology stock
    B. A consumer staples stock that sells food and household products
    C. A stock in a luxury goods company
    D. A stock in an emerging market country

 

56. An investor who believes that the price of a stock will decrease might engage in:
    A. Buying the stock
    B. Short selling the stock
    C. Dividend reinvestment
    D. Buying a bond

 

57. A company’s “dividend payout ratio” is calculated by:
    A. Dividing the company’s earnings by its stock price
    B. Dividing the dividend by the company’s earnings
    C. Subtracting the dividends from total revenue
    D. Adding the stock price to the total revenue

 

58. What does “buy and hold” refer to in investment strategy?
    A. Selling investments quickly to capture short-term gains
    B. Holding investments for a long period with minimal trading
    C. Actively trading stocks to exploit market fluctuations
    D. Only investing in government securities

 

59. The “efficient frontier” in portfolio theory represents:
    A. The maximum risk for a given return
    B. The minimum risk for a given return
    C. The portfolio with the highest return
    D. The portfolio with the lowest correlation to the market

 

60. What is “systematic risk”?
    A. Risk that can be diversified away
    B. Risk associated with a specific company or industry
    C. Risk that affects the entire market or economy
    D. Risk related to government policies only

 

 

61. Which of the following is NOT considered a fixed-income security?
    A. Corporate bonds
    B. Treasury bonds
    C. Preferred stock
    D. Municipal bonds

 

62. The “capital asset pricing model” (CAPM) is used to:
    A. Calculate the market value of a stock
    B. Determine the expected return of an asset based on its risk
    C. Measure the correlation between stocks
    D. Set the price of options in the market

 

63. Which of the following investment types offers diversification across different asset classes?
    A. Exchange-traded funds (ETFs)
    B. Individual stocks
    C. Corporate bonds
    D. Single-sector mutual funds

 

64. The term “yield to maturity” (YTM) refers to:
    A. The coupon rate of a bond
    B. The total return anticipated on a bond if held until it matures
    C. The dividend paid on a stock
    D. The price of a bond when it is sold in the market

 

65. A stock with a high beta (greater than 1) is expected to:
    A. Be less volatile than the market
    B. Have lower returns than the market
    C. Be more volatile than the market
    D. Have no correlation to the market

 

66. A portfolio’s “standard deviation” measures:
    A. The average return of the portfolio
    B. The correlation between assets in the portfolio
    C. The total risk or volatility of the portfolio
    D. The expected return of the portfolio

 

67. Which of the following is an example of an actively managed investment vehicle?
    A. Exchange-traded fund (ETF)
    B. Index fund
    C. Mutual fund
    D. Treasury bond

 

68. An investor who wants to reduce exposure to market risk through diversification should invest in:
    A. Securities that are highly correlated with each other
    B. A portfolio of stocks from different sectors and industries
    C. Only stocks from the technology sector
    D. Only bonds from government entities

 

69. The primary difference between a bond’s coupon rate and its yield to maturity (YTM) is that:
    A. The coupon rate is based on the bond’s market price, while YTM is based on the bond’s face value
    B. YTM includes the bond’s capital gain or loss, while the coupon rate does not
    C. The coupon rate reflects the interest rate set by the government, while YTM reflects interest rates in the market
    D. The coupon rate is the return on equity, while YTM is the return on debt

 

70. Which of the following is a characteristic of a “blue-chip” stock?
    A. High growth potential but high volatility
    B. Established company with a strong track record of stability and dividends
    C. New company with high potential for capital appreciation
    D. Stock in a company that issues bonds to raise capital

 

71. The concept of “portfolio diversification” suggests that:
    A. A portfolio of only one asset type will reduce risk
    B. The total risk of a portfolio can be reduced by combining assets that do not move in perfect correlation with each other
    C. Diversification always leads to higher returns
    D. A portfolio should only consist of stocks to maximize returns

 

72. Which of the following is true about Treasury bonds?
    A. They are issued by corporations to raise capital
    B. They are short-term securities issued by the federal government
    C. They are backed by the full faith and credit of the U.S. government
    D. They offer higher returns than municipal bonds

 

73. What is the main characteristic of a “growth mutual fund”?
    A. It focuses on providing regular income through dividends
    B. It primarily invests in stocks with high potential for growth but may not pay dividends
    C. It invests in bonds to provide stable returns
    D. It only invests in large-cap companies

 

74. Which of the following would an investor use to hedge against inflation?
    A. Treasury bills
    B. Stocks in non-cyclical industries
    C. Commodities, such as gold or oil
    D. Government bonds with fixed interest rates

 

75. The efficient market hypothesis (EMH) asserts that:
    A. Stock prices are always at their fair value and reflect all available information
    B. Active management is essential for generating higher returns than the market
    C. Only fundamental analysis can accurately predict future stock prices
    D. The market is inefficient, and prices often deviate from their true value

 

76. The “diversification benefit” refers to:
    A. The ability of an investor to earn a higher return by focusing on a single asset class
    B. The reduction in risk that occurs when combining assets that are not perfectly correlated
    C. The increase in volatility when combining risky assets
    D. The process of selecting the best-performing stocks

 

77. A “call option” gives the holder the right to:
    A. Sell a stock at a predetermined price
    B. Buy a stock at a predetermined price
    C. Buy or sell a bond at market value
    D. Exercise the right to avoid paying taxes on a stock

 

78. The term “market capitalization” refers to:
    A. The total value of a company’s outstanding bonds
    B. The total market value of a company’s equity, calculated by multiplying the stock price by shares outstanding
    C. The amount of capital a company has raised from the government
    D. The total assets owned by a company

 

79. Which of the following best describes an “index fund”?
    A. A fund that is actively managed to outperform the market
    B. A fund that passively tracks a specific market index
    C. A fund that only invests in high-risk stocks
    D. A fund that invests primarily in government securities

 

80. Which of the following is a key difference between a “closed-end” mutual fund and an “open-end” mutual fund?
    A. A closed-end fund does not issue shares after the initial offering, while an open-end fund continuously issues shares
    B. A closed-end fund can only be sold back to the fund manager, while an open-end fund can be sold on the secondary market
    C. A closed-end fund is typically cheaper to manage than an open-end fund
    D. There is no difference between the two types of funds

 

81. A “dividend yield” is calculated by:
    A. Dividing the dividend by the stock’s market price
    B. Dividing the dividend by the stock’s book value
    C. Dividing the stock’s earnings by its market price
    D. Adding the stock price and dividend payout

 

82. The “price-to-book” (P/B) ratio compares:
    A. The price of a stock to the company’s total revenue
    B. The price of a stock to the company’s earnings
    C. The price of a stock to the company’s net worth (book value)
    D. The price of a stock to the company’s debt level

 

83. The “net asset value” (NAV) of a mutual fund is calculated by:
    A. Dividing the total value of assets in the fund by the number of shares outstanding
    B. Calculating the portfolio’s average return over the last 12 months
    C. Multiplying the portfolio’s price per share by its earnings
    D. Subtracting the fund’s liabilities from its assets and dividing by the number of shares

 

84. Which of the following is an advantage of investing in ETFs over mutual funds?
    A. ETFs can be traded throughout the day like stocks
    B. ETFs are actively managed
    C. ETFs have no management fees
    D. ETFs guarantee returns

 

85. A “high-yield bond” is often referred to as a:
    A. Investment-grade bond
    B. Junk bond
    C. Treasury bond
    D. Municipal bond

 

86. Which of the following best describes a “diversified” portfolio?
    A. A portfolio consisting only of stocks from a single sector
    B. A portfolio that includes a variety of asset classes such as stocks, bonds, and real estate
    C. A portfolio focused only on large-cap stocks
    D. A portfolio of bonds with the same maturity date

 

87. A “target-date fund” is designed for investors who:
    A. Want to focus solely on growth and capital appreciation
    B. Plan to retire at a specific date and want their portfolio to adjust automatically
    C. Want to invest only in short-term bonds
    D. Prefer active management and stock picking

 

88. Which of the following is an example of a risk-free asset?
    A. Corporate bond
    B. Treasury bond
    C. Municipal bond
    D. International stock

 

89. The “expected return” of a portfolio can be calculated by:
    A. Taking the average of the returns of the individual assets
    B. Adding the returns of all assets and dividing by the number of assets
    C. Using the weighted average of the returns based on the percentage of total investment in each asset
    D. Using only the return of the best-performing asset

 

90. The primary goal of “modern portfolio theory” is to:
    A. Maximize the risk of a portfolio
    B. Minimize the return while maximizing risk
    C. Create a portfolio that offers the highest return for a given level of risk
    D. Focus solely on maximizing returns from stocks

 

 

91. Which of the following is true about mutual funds?
    A. Mutual funds are traded on the stock exchange like stocks
    B. Mutual funds are typically managed by a professional fund manager
    C. Mutual funds have no management fees
    D. Mutual funds are always passively managed

 

92. What is a “stock split”?
    A. A company divides its existing stock into multiple shares to increase liquidity
    B. A company combines multiple shares into one to reduce volatility
    C. A company offers new stock to the public
    D. A company repurchases its own shares from investors

 

93. Which of the following investment vehicles is considered the most liquid?
    A. Real estate
    B. Stocks
    C. Private equity
    D. Treasury bonds

 

94. A “limit order” in the context of stock trading is:
    A. An order to buy or sell a stock at the market price
    B. An order to buy or sell a stock at a specific price or better
    C. An order that can only be executed during market hours
    D. An order that requires the trader to have a margin account

 

95. A “short sale” involves:
    A. Buying stocks with borrowed funds
    B. Selling stocks that are not owned by the seller
    C. Purchasing bonds to raise funds
    D. Borrowing money from the bank to buy a bond

 

96. What is the “diversification benefit” primarily based on?
    A. Spreading investments across stocks in the same industry
    B. Spreading investments across asset classes and industries with low correlation
    C. Concentrating investments in high-performing assets
    D. Investing in government bonds only

 

97. Which of the following is NOT a characteristic of preferred stock?
    A. It typically pays a fixed dividend
    B. It has priority over common stock in receiving dividends
    C. It grants voting rights in the company
    D. It is considered a hybrid between stocks and bonds

 

98. The “efficient frontier” in portfolio theory represents:
    A. The point where the portfolio’s risk is minimized for a given level of return
    B. The portfolio that provides the highest return with the highest risk
    C. A portfolio consisting of only risk-free assets
    D. The average return of a portfolio over a certain period

 

99. What is the key difference between a “primary market” and a “secondary market”?
    A. The primary market involves trading between investors, while the secondary market involves issuing new securities
    B. The primary market involves issuing new securities, while the secondary market involves trading existing securities
    C. The secondary market is regulated by the SEC, while the primary market is not
    D. The secondary market involves government bonds, while the primary market involves stocks

 

100. A bond with a “call provision” allows the issuer to:
     A. Change the bond’s interest rate
     B. Redeem the bond before its maturity date
     C. Increase the bond’s coupon rate
     D. Convert the bond into equity shares

 

101. “Capital gains” on an investment refer to:
     A. The income generated by dividends or interest
     B. The increase in the market value of an asset
     C. The interest earned on a bond
     D. The tax owed on the sale of an asset

 

102. What is the primary advantage of a “Roth IRA” over a traditional IRA?
     A. Contributions to a Roth IRA are tax-deductible
     B. Roth IRA earnings grow tax-free and can be withdrawn tax-free after retirement
     C. Contributions to a Roth IRA are tax-deferred
     D. A Roth IRA allows for larger contributions than a traditional IRA

 

103. In the context of mutual funds, “expense ratio” refers to:
     A. The cost of purchasing shares in the fund
     B. The annual fees charged to manage the fund, expressed as a percentage of assets
     C. The cost of selling shares in the fund
     D. The total value of the assets in the fund

 

104. Which of the following is NOT a type of risk associated with bond investments?
     A. Interest rate risk
     B. Default risk
     C. Liquidity risk
     D. Dividend risk

 

105. A “market order” in stock trading is:
     A. An order to buy or sell a stock at a specific price
     B. An order to buy or sell a stock at the best available price in the market
     C. An order to buy or sell a stock after the market closes
     D. An order to buy or sell a stock with a limit on the amount of time

 

106. Which of the following factors can affect the price of a bond?
     A. Changes in the company’s stock price
     B. Changes in interest rates
     C. Changes in dividend payments
     D. Changes in the bond’s maturity date

 

107. The “beta” of a stock measures:
     A. The stock’s sensitivity to overall market movements
     B. The stock’s dividend yield
     C. The average return on the stock over the past five years
     D. The stock’s price-to-earnings (P/E) ratio

 

108. An investor is considering investing in a “high-yield bond” from a company with a low credit rating. What is the primary risk?
     A. Interest rate risk
     B. Default risk
     C. Liquidity risk
     D. Inflation risk

 

109. What is “systematic risk”?
     A. Risk that can be eliminated through diversification
     B. Risk associated with the overall market and cannot be diversified away
     C. Risk related to specific industries or companies
     D. Risk that arises from changes in interest rates

 

110. The “price-to-earnings” (P/E) ratio is calculated by:
     A. Dividing the stock’s price by the company’s earnings per share
     B. Dividing the company’s earnings per share by the stock price
     C. Adding the stock price and the company’s dividend
     D. Dividing the company’s net worth by the stock price

 

111. An investor who purchases a “put option” is betting that:
     A. The price of the underlying asset will rise
     B. The price of the underlying asset will remain stable
     C. The price of the underlying asset will fall
     D. The price of the underlying asset will stay unchanged

 

112. Which of the following is a key advantage of “exchange-traded funds” (ETFs) compared to mutual funds?
     A. ETFs can only be bought and sold at the end of the trading day
     B. ETFs have higher management fees than mutual funds
     C. ETFs are traded like stocks on exchanges, providing more liquidity
     D. ETFs are less diversified than mutual funds

 

113. What is the role of a “market maker” in securities trading?
     A. To provide loans to investors
     B. To buy and sell securities to maintain liquidity in the market
     C. To issue new securities for companies
     D. To monitor and regulate trading activity

 

114. What is “interest rate risk” in the context of bond investments?
     A. The risk that the bond issuer will default on the bond
     B. The risk that rising interest rates will cause the bond’s price to fall
     C. The risk that the bond’s coupon rate will decrease
     D. The risk that inflation will reduce the bond’s purchasing power

 

115. Which of the following is an example of a defensive stock?
     A. A technology company with high growth potential
     B. A utility company that provides essential services
     C. A startup with a highly volatile stock
     D. A biotechnology company developing new drugs

 

116. The “Sharpe ratio” is used to:
     A. Calculate the average return of a portfolio
     B. Evaluate the risk-adjusted return of an investment portfolio
     C. Measure the diversification benefits of a portfolio
     D. Calculate the correlation between different asset classes

 

117. Which of the following describes a “bear market”?
     A. A market in which prices are rising and investor optimism is high
     B. A market characterized by falling stock prices and investor pessimism
     C. A market that is experiencing high volatility but no clear trend
     D. A market that only involves bonds and government securities

 

118. A “growth stock” is typically characterized by:
     A. Stable dividends and steady earnings
     B. High volatility and potential for capital appreciation
     C. Lower risk and consistent earnings
     D. Low P/E ratio and high dividend yield

 

 

119. What is the “current yield” of a bond?
     A. The total return earned by the bondholder
     B. The bond’s annual coupon payment divided by its current market price
     C. The bond’s maturity value divided by its current market price
     D. The bond’s total interest income divided by its face value

 

120. Which of the following is a primary characteristic of a “growth stock”?
     A. It typically offers high dividend yields
     B. It is expected to grow at an above-average rate compared to other companies
     C. It has a low price-to-earnings (P/E) ratio
     D. It offers stable earnings with minimal risk

 

121. In the context of investment portfolios, “rebalancing” refers to:
     A. Changing the risk profile of the portfolio by adding more bonds
     B. Adjusting the portfolio’s holdings to maintain the desired asset allocation
     C. Selling all the investments in the portfolio and starting fresh
     D. Reducing the number of assets in the portfolio to cut costs

 

122. A “high-yield” bond is typically associated with:
     A. A company with a high credit rating
     B. A bond with a low coupon rate
     C. A bond with a higher risk of default
     D. A government-issued bond

 

123. Which of the following statements best describes the “efficient market hypothesis” (EMH)?
     A. It asserts that markets are not always rational, and there are opportunities for arbitrage
     B. It states that stock prices reflect all available information, and it is impossible to consistently outperform the market
     C. It suggests that active management of investment portfolios is essential to achieving high returns
     D. It argues that the market is controlled by a few large institutional investors who manipulate stock prices

 

124. A “bull market” is typically associated with:
     A. Rising stock prices and investor optimism
     B. Declining stock prices and investor pessimism
     C. A stagnant market with no significant price changes
     D. A market dominated by government bonds and low-interest rates

 

125. In portfolio theory, “systematic risk” is also known as:
     A. Unsystematic risk
     B. Market risk
     C. Diversifiable risk
     D. Specific risk

 

126. The primary objective of “asset allocation” is to:
     A. Maximize risk while ensuring high returns
     B. Minimize the risk of a portfolio by dividing assets into different categories
     C. Focus on one asset class for high returns
     D. Achieve equal returns across all asset classes

 

127. Which of the following is an example of an “exchange-traded fund” (ETF)?
     A. A bond that pays interest periodically
     B. A mutual fund that is traded on the stock exchange
     C. A bond issued by the U.S. government
     D. A stock of a multinational company traded on the NYSE

 

128. Which of the following would most likely be considered a “blue-chip stock”?
     A. A newly-formed technology startup
     B. A well-established company with a history of stable earnings and dividend payments
     C. A company with high volatility and speculative growth potential
     D. A small company with significant debt

 

129. What is the primary purpose of “portfolio diversification”?
     A. To increase the risk of the portfolio
     B. To ensure the portfolio contains only low-risk assets
     C. To spread risk by investing in a variety of assets to reduce overall risk
     D. To focus on one asset class for higher returns

 

130. Which of the following types of bonds is typically the most risky?
     A. U.S. Treasury bonds
     B. Municipal bonds
     C. Corporate bonds from high-risk companies
     D. Bonds issued by large multinational corporations

 

131. A “money market fund” typically invests in:
     A. Stocks of high-growth companies
     B. Short-term debt securities such as Treasury bills and certificates of deposit
     C. Long-term bonds
     D. Commodities like oil and gold

 

132. The “price-to-book” (P/B) ratio is calculated by:
     A. Dividing the stock’s price by the company’s earnings per share
     B. Dividing the stock’s price by the company’s book value per share
     C. Multiplying the stock’s price by the company’s earnings per share
     D. Adding the stock’s price to the company’s market capitalization

 

133. Which of the following is NOT a primary factor influencing bond prices?
     A. Changes in interest rates
     B. The bond’s credit rating
     C. The bond’s coupon rate
     D. The bondholder’s dividend yield

 

134. Which of the following is an example of “capital appreciation”?
     A. Receiving regular dividend payments from stocks
     B. Selling a stock at a higher price than its purchase price
     C. Earning interest on a savings account
     D. Receiving income from rental property

 

135. A “convertible bond” is a bond that can:
     A. Be redeemed by the issuer before maturity
     B. Be converted into a predetermined number of shares of the issuing company’s stock
     C. Only be traded on the bond market
     D. Pay dividends like preferred stock

 

136. The “Treasury yield curve” typically slopes:
     A. Downward, as long-term interest rates are lower than short-term rates
     B. Upward, reflecting higher long-term rates than short-term rates
     C. Horizontally, indicating equal interest rates for all maturities
     D. Upward for short-term bonds and downward for long-term bonds

 

137. Which of the following is NOT a feature of a “Treasury bond”?
     A. Issued by the U.S. government
     B. Typically has a maturity of 30 years
     C. Exempt from state and local taxes
     D. Pays dividends to bondholders

 

138. Which of the following is the primary advantage of “index funds” over actively managed funds?
     A. Index funds have higher management fees
     B. Index funds are less diversified
     C. Index funds replicate a market index, offering lower fees and broad diversification
     D. Index funds guarantee higher returns

 

139. Which of the following is NOT a characteristic of a “coupon bond”?
     A. It pays periodic interest to the bondholder
     B. It is issued with a fixed maturity date
     C. It can be converted into shares of stock
     D. It has a specified interest rate (coupon rate)

 

140. A “dividend reinvestment plan” (DRIP) allows investors to:
     A. Automatically invest dividends to purchase more shares of the stock
     B. Redeem dividends for cash payments
     C. Pay taxes on dividends at a lower rate
     D. Convert dividends into bond investments

 

 

141. Which of the following best defines “liquidity” in the context of investments?
     A. The risk associated with holding an investment
     B. The ease with which an asset can be converted into cash without significant loss of value
     C. The amount of interest paid by an investment
     D. The ability of an investment to generate consistent returns

 

142. In terms of risk and return, a “risk-return tradeoff” suggests that:
     A. Higher risk generally leads to lower returns
     B. Lower risk always leads to higher returns
     C. Higher risk is typically associated with the potential for higher returns
     D. Risk and return are unrelated

 

143. Which of the following best describes a “municipal bond”?
     A. A bond issued by a private corporation
     B. A bond issued by a city or local government
     C. A bond issued by the U.S. Treasury
     D. A bond that pays interest based on corporate profits

 

144. What is the main advantage of investing in “exchange-traded funds” (ETFs) compared to mutual funds?
     A. ETFs are only available for short-term investments
     B. ETFs can be traded throughout the day on the stock exchange, while mutual funds are priced at the end of the trading day
     C. ETFs offer higher fees than mutual funds
     D. ETFs are only available for institutional investors

 

145. Which of the following is an example of a “defensive stock”?
     A. A technology company experiencing rapid growth
     B. A utility company with steady earnings even during economic downturns
     C. A small-cap stock with high volatility
     D. A biotech startup

 

146. The “net asset value” (NAV) of a mutual fund is:
     A. The price of an individual share of the fund
     B. The total value of a fund’s holdings, minus liabilities, divided by the number of shares outstanding
     C. The total income generated by the fund’s investments
     D. The price at which the fund’s shares are sold to the public

 

147. “Diversification” helps investors to:
     A. Increase the overall risk of their portfolio
     B. Decrease the volatility of their portfolio by spreading investments across different asset classes
     C. Focus on a single asset class to maximize returns
     D. Eliminate the need for monitoring their investments

 

148. Which of the following is considered a “commodity investment”?
     A. U.S. Treasury bonds
     B. Shares of a technology company
     C. Gold and oil futures contracts
     D. High-yield corporate bonds

 

149. Which of the following is an example of an “equity security”?
     A. A government bond
     B. A preferred stock
     C. A money market fund
     D. A corporate bond

 

150. A “mutual fund” is generally considered a good investment for someone who:
     A. Wants to take on significant risk for potentially higher returns
     B. Prefers a passive investment strategy with broad diversification
     C. Is interested in trading individual stocks frequently
     D. Seeks to invest in a single asset class to maximize returns

 

151. Which of the following statements is true about “preferred stock”?
     A. Preferred stockholders have a right to vote on company matters
     B. Preferred stock typically offers a fixed dividend, but no voting rights
     C. Preferred stock is riskier than common stock
     D. Preferred stock dividends are always higher than common stock dividends

 

152. Which of the following is the best description of “capital gains”?
     A. Income received from bonds or dividends
     B. The increase in the value of an asset or investment
     C. The interest paid on a savings account
     D. A fee paid to brokers for executing a trade

 

153. In the context of bonds, “duration” is a measure of:
     A. The total interest paid by the bond
     B. The bond’s sensitivity to interest rate changes
     C. The bond’s coupon rate
     D. The period until the bond matures

 

154. What is the main difference between “load” and “no-load” mutual funds?
     A. Load funds have higher returns than no-load funds
     B. No-load funds are sold without a commission or sales charge
     C. Load funds are exempt from taxes
     D. No-load funds have higher management fees than load funds

 

155. The “price-to-earnings” (P/E) ratio is a measure used to evaluate:
     A. The return on investment for bonds
     B. The relationship between a company’s stock price and its earnings
     C. The credit risk of a bond
     D. The diversification of an investment portfolio

 

156. In portfolio theory, the “correlation coefficient” measures:
     A. The risk of an individual asset
     B. The relationship between the returns of two different assets
     C. The overall risk of a portfolio
     D. The expected return of a portfolio

 

157. An investor is seeking a “tax-advantaged” investment. Which of the following would be a good option?
     A. A municipal bond
     B. A corporate bond
     C. A dividend-paying stock
     D. A high-risk mutual fund

 

158. “Dollar-cost averaging” is an investment strategy that involves:
     A. Investing a large sum of money at one time in a single asset
     B. Consistently investing a fixed amount of money at regular intervals, regardless of market conditions
     C. Selling off investments when the market is high and buying more when the market is low
     D. Focusing investments in low-risk bonds only

 

159. What is a primary advantage of “corporate bonds” over “municipal bonds”?
     A. Corporate bonds offer tax-exempt interest income
     B. Corporate bonds typically offer higher yields than municipal bonds
     C. Corporate bonds are less risky than municipal bonds
     D. Corporate bonds are issued by government entities

 

160. Which of the following would most likely be considered a “speculative” investment?
     A. A well-established blue-chip stock
     B. A government bond with a AAA rating
     C. A high-risk penny stock with potential for rapid price swings
     D. A balanced mutual fund with low volatility

 

 

161. What is the primary objective of “portfolio diversification”?
     A. To increase the risk of the portfolio
     B. To achieve a mix of asset classes that reduce overall portfolio risk
     C. To focus investments in high-risk stocks only
     D. To invest in a single type of asset for higher returns

 

162. A “bond rating” primarily assesses the:
     A. Total return of the bond
     B. Likelihood that the bond issuer will default
     C. Interest rate paid on the bond
     D. Duration of the bond

 

163. Which of the following best describes a “bull market”?
     A. A market characterized by falling stock prices
     B. A market characterized by rising stock prices
     C. A market characterized by no significant change in prices
     D. A market where bonds outperform stocks

 

164. Which of the following is a key characteristic of a “growth stock”?
     A. It pays regular dividends to shareholders
     B. It has a high level of price volatility and is expected to grow faster than the overall market
     C. It is typically low-risk and stable
     D. It focuses on maintaining steady earnings with little potential for growth

 

165. What is the “effective yield” of a bond?
     A. The interest rate paid by the bond issuer
     B. The bond’s coupon rate
     C. The total return on the bond, accounting for the bond’s price and interest payments
     D. The total return on the bond minus taxes

 

166. What is “systematic risk”?
     A. The risk specific to an individual asset
     B. The overall risk of the market that cannot be diversified away
     C. The risk associated with a company’s management
     D. The risk of a natural disaster affecting investments

 

167. An investor who wants to avoid risk and is willing to accept lower returns would likely invest in:
     A. High-growth stocks
     B. Commodities
     C. Treasury bonds
     D. High-risk mutual funds

 

168. Which of the following investment vehicles typically offers the most liquidity?
     A. Real estate investments
     B. Treasury bills
     C. Private equity
     D. Long-term bonds

 

169. A “preferred stock” is most similar to:
     A. A bond, because it offers fixed payments
     B. Common stock, because it provides voting rights
     C. A money market account, because it is highly liquid
     D. A bond, because it has a maturity date

 

170. The “Sharpe ratio” is used to measure:
     A. The overall risk of a stock
     B. The return relative to the risk taken on an investment
     C. The diversification of a portfolio
     D. The correlation between two different assets

 

171. In a “down market,” a defensive investment strategy would most likely involve:
     A. Selling off all investments
     B. Investing in riskier assets to take advantage of potential gains
     C. Focusing on investments that perform well during recessions, such as utilities
     D. Focusing exclusively on short-term bonds

 

172. What does the “yield to maturity” (YTM) of a bond represent?
     A. The bond’s coupon rate
     B. The total return an investor can expect if the bond is held to maturity
     C. The bond’s market price
     D. The bond’s tax rate

 

173. The “capital asset pricing model” (CAPM) is used to:
     A. Estimate the future returns of stocks
     B. Calculate the expected return based on an asset’s risk and the market’s overall return
     C. Determine the price of a bond
     D. Assess the liquidity of an asset

 

174. Which of the following would most likely be classified as a “real asset”?
     A. A corporate bond
     B. A piece of land
     C. A mutual fund
     D. A Treasury bill

 

175. Which of the following would be considered a “tax-advantaged” account?
     A. A brokerage account
     B. A savings account
     C. A 401(k) retirement account
     D. A checking account

 

176. What is the main characteristic of a “high-yield bond”?
     A. It is a bond issued by a highly stable government
     B. It offers a higher interest rate due to a higher risk of default
     C. It is issued by a corporation with low debt
     D. It has a low coupon rate and is less risky than government bonds

 

177. A “blue-chip stock” is generally considered:
     A. A highly speculative investment
     B. A stock in a company that is well-established and financially stable
     C. A stock in a new, fast-growing company
     D. A stock with a high risk of failure

 

178. What is a “call option” in investing?
     A. An option to buy an asset at a predetermined price within a certain time frame
     B. An option to sell an asset at a predetermined price within a certain time frame
     C. A type of bond issued by corporations
     D. A fund that invests in multiple asset classes

 

179. Which of the following best describes “market efficiency”?
     A. The market always provides the highest possible returns to investors
     B. The market prices reflect all available information and adjust quickly to new data
     C. Prices of assets always move in the same direction
     D. Investors can always predict future price movements

 

180. “Hedging” in investment terms refers to:
     A. Diversifying an investment portfolio across multiple asset classes
     B. Taking on more risk to potentially achieve higher returns
     C. Using investment strategies to reduce the risk of adverse price movements in an asset
     D. Focusing only on low-risk investments

 

 

181. Which of the following best describes an “exchange-traded fund” (ETF)?
     A. A type of investment that can only be traded at the end of the trading day
     B. A mutual fund that is traded on an exchange, like a stock
     C. A bond that trades on an exchange
     D. A government-issued security

 

182. In “Modern Portfolio Theory” (MPT), which of the following is used to reduce risk?
     A. Investing in a single stock
     B. Holding a diversified portfolio of assets
     C. Focusing only on high-risk assets
     D. Investing exclusively in government bonds

 

183. The “interest rate risk” of a bond is the risk that:
     A. The bond issuer will default
     B. The bond’s price will decrease due to rising interest rates
     C. The bond’s price will increase due to falling interest rates
     D. The bond’s coupon payments will be delayed

 

184. Which of the following is NOT a characteristic of “preferred stock”?
     A. It provides regular dividends
     B. It has voting rights in company matters
     C. It has a higher claim on assets than common stock
     D. It typically has a fixed dividend rate

 

185. A “maturity date” for a bond refers to:
     A. The date the bond’s coupon payments stop
     B. The date when the bond issuer will repay the principal amount
     C. The date the bond starts paying interest
     D. The date the bondholder can sell the bond

 

186. What is the purpose of a “stop-loss order” in trading?
     A. To lock in profits by selling once the stock price reaches a certain level
     B. To prevent further losses by selling a security if its price drops to a certain level
     C. To buy stocks automatically when prices rise
     D. To trade stocks without incurring any fees

 

187. A “growth-oriented portfolio” is likely to contain:
     A. Bonds and certificates of deposit (CDs)
     B. High-yield, low-risk investments
     C. Stocks of companies with high growth potential
     D. Municipal bonds

 

188. Which of the following is an advantage of investing in a “mutual fund”?
     A. Investors have control over individual stock selections
     B. Mutual funds are highly liquid and can be traded during market hours
     C. Mutual funds offer professional management and diversification
     D. Mutual funds do not carry any risk

 

189. “Alpha” in investing refers to:
     A. The correlation between two stocks
     B. The amount of return a portfolio generates above the expected return based on its risk
     C. The risk-free rate of return
     D. The total return of a stock

 

190. The “price-to-earnings” (P/E) ratio is used to evaluate:
     A. A company’s dividend policy
     B. The relative value of a company’s stock
     C. The interest rate on a bond
     D. A company’s profit margins

 

191. Which of the following would most likely be classified as a “commodity”?
     A. A stock in a technology company
     B. A bond issued by the government
     C. Crude oil
     D. A savings account

 

192. A “bullish” investor expects the price of an asset to:
     A. Remain stable
     B. Fall
     C. Rise
     D. Increase dramatically and then drop

 

193. Which of the following investment strategies focuses on investing in assets that are undervalued?
     A. Growth investing
     B. Index investing
     C. Value investing
     D. Momentum investing

 

194. The “dividend yield” of a stock is calculated by:
     A. Dividing the stock’s price by the company’s earnings
     B. Dividing the annual dividends per share by the stock’s price
     C. Dividing the stock’s price by the company’s total assets
     D. Dividing the stock’s earnings per share by the company’s debt

 

195. Which of the following is the best example of a “real asset”?
     A. A share of Apple stock
     B. A bond issued by the government
     C. A piece of land
     D. A mutual fund

 

196. Which of the following is a characteristic of “high-yield” bonds?
     A. They are issued by highly stable companies
     B. They offer lower yields compared to investment-grade bonds
     C. They are riskier and offer higher yields to compensate for the risk
     D. They are government bonds

 

197. “Capital gains” are:
     A. Dividends paid to shareholders
     B. The profit from selling an asset for more than its purchase price
     C. The interest earned from bonds
     D. The total income from a stock

 

198. Which of the following is an example of a “passive investment strategy”?
     A. Attempting to outperform the market by actively selecting stocks
     B. Buying and holding a broad market index fund
     C. Selling investments frequently to capitalize on market movements
     D. Trading individual stocks based on short-term price predictions

 

199. What does the “current ratio” measure for a company?
     A. The company’s profitability
     B. The company’s ability to pay its short-term liabilities with its short-term assets
     C. The company’s long-term debt obligations
     D. The company’s investment risk

 

200. The “diversification” strategy involves:
     A. Investing in a variety of assets to reduce risk
     B. Focusing on a single asset type to maximize return
     C. Trading assets frequently to take advantage of short-term price movements
     D. Only investing in government bonds

 

 

201. A “call option” gives the holder the right to:
     A. Sell a stock at a specific price at any time before expiration
     B. Buy a stock at a specific price at any time before expiration
     C. Buy a stock at a specific price only on the expiration date
     D. Sell a stock at a specific price only on the expiration date

 

202. “Beta” is a measure of:
     A. The overall return of a portfolio
     B. A stock’s volatility relative to the market
     C. A stock’s dividend yield
     D. The overall risk-free rate of return

 

203. In an efficient market, the following statement is true:
     A. Stock prices always reflect the intrinsic value of the company
     B. Investors can easily outperform the market using technical analysis
     C. All available information is reflected in stock prices, making it impossible to consistently outperform the market
     D. Stocks are always overvalued

 

204. The main purpose of “portfolio diversification” is to:
     A. Maximize returns by investing in high-risk stocks
     B. Minimize taxes paid on returns
     C. Spread risk across various assets to reduce the impact of any one asset’s poor performance
     D. Focus on investments with the highest dividends

 

205. Which of the following is considered a “safe haven” investment during times of market uncertainty?
     A. High-yield bonds
     B. Treasury bonds
     C. Real estate investment trusts (REITs)
     D. Growth stocks

 

206. A “forward contract” is:
     A. A type of insurance policy for investors
     B. A contract to buy or sell an asset at a future date for a predetermined price
     C. A type of government bond
     D. A stock option that guarantees a future return

 

207. Which of the following is a primary risk associated with bonds?
     A. Liquidity risk
     B. Default risk
     C. Currency risk
     D. All of the above

 

208. A “stock split” results in:
     A. A decrease in the number of shares in circulation
     B. A reduction in the stock price, while maintaining the overall value of the investment
     C. A proportional increase in the stock price
     D. A reduction in the company’s total market capitalization

 

209. A “junk bond” is:
     A. A bond issued by a government entity with a low credit rating
     B. A high-risk, high-yield bond with a rating below investment grade
     C. A bond issued by a blue-chip company
     D. A government bond with no default risk

 

210. In the context of investing, “liquidity” refers to:
     A. The ability of an investment to generate income
     B. The ease with which an investment can be bought or sold without affecting its price
     C. The risk of an investment’s value decreasing
     D. The proportion of an asset’s return that is taxable

 

211. “Systematic risk” refers to:
     A. The risk of a particular company going bankrupt
     B. The risk that is inherent in the entire market or market segment
     C. The risk associated with individual stocks
     D. The risk that can be eliminated through diversification

 

212. Which of the following types of funds typically focus on investing in a broad range of industries?
     A. Sector funds
     B. Equity funds
     C. Bond funds
     D. Index funds

 

213. A “market order” is an instruction to:
     A. Buy or sell a stock at the best available price immediately
     B. Buy or sell a stock at a specific price or better
     C. Place an order that will only be executed on the expiration date
     D. Trade a stock on margin

 

214. A “capital gain” occurs when:
     A. An asset is sold for more than its purchase price
     B. An asset is sold for less than its purchase price
     C. An investor receives a dividend payment
     D. A stock price decreases over time

 

215. The “price-to-book ratio” (P/B ratio) is a measure of:
     A. A company’s profitability relative to its assets
     B. The company’s debt levels relative to its equity
     C. The company’s stock price relative to its book value
     D. A company’s total assets relative to its earnings

 

216. Which of the following is the main advantage of investing in a “mutual fund”?
     A. Low fees
     B. Liquidity
     C. Professional management and diversification
     D. High-risk exposure

 

217. The “sharpe ratio” is used to:
     A. Measure a portfolio’s performance relative to the market
     B. Assess the risk-adjusted return of a portfolio
     C. Predict future stock prices
     D. Determine a stock’s intrinsic value

 

218. Which of the following is a characteristic of “municipal bonds”?
     A. They are issued by corporations
     B. They are typically exempt from federal taxes
     C. They have a very high level of risk
     D. They are generally issued by the federal government

 

219. “Risk tolerance” refers to:
     A. The level of risk an investor is willing to take in exchange for potential return
     B. The amount of risk in a portfolio
     C. The maximum amount of money an investor is willing to lose
     D. The ability to avoid market fluctuations

 

220. “Emerging market funds” focus on investments in:
     A. Large-cap stocks in developed countries
     B. Small-cap stocks in emerging markets with high growth potential
     C. Government bonds in developed countries
     D. Stocks in companies that are considered “blue-chip”

 

 

221. Which of the following types of investments is least affected by interest rate changes?
     A. Long-term government bonds
     B. Short-term treasury bills
     C. Corporate bonds
     D. Real estate investment trusts (REITs)

 

222. The “efficient frontier” in portfolio theory represents:
     A. The maximum return for a given level of risk
     B. The minimum return for a given level of risk
     C. The combination of assets that produces the highest risk
     D. The point at which all risk is eliminated from the portfolio

 

223. A “dividend” is:
     A. A payment made by the bond issuer to bondholders
     B. The difference between a stock’s purchase price and its sale price
     C. A payment made by a corporation to its shareholders out of profits
     D. The interest rate paid on corporate bonds

 

224. The “current ratio” is used to assess a company’s:
     A. Liquidity position
     B. Profitability
     C. Debt level
     D. Stock price performance

 

225. Which of the following is NOT an example of an investment vehicle?
     A. Stock
     B. Mutual fund
     C. Savings account
     D. Bank checking account

 

226. Which of the following statements about “exchange-traded funds” (ETFs) is TRUE?
     A. ETFs are only available in the U.S. market
     B. ETFs are passive investments that track an index or sector
     C. ETFs cannot be traded throughout the day
     D. ETFs do not require a brokerage account to trade

 

227. “Active management” of a portfolio refers to:
     A. Making frequent buy and sell decisions based on research and market forecasts
     B. Holding a portfolio for the long term without making changes
     C. Investing in a passively managed fund that tracks an index
     D. Holding assets with no intention of managing or monitoring them

 

228. The primary purpose of the “Securities and Exchange Commission” (SEC) is to:
     A. Promote the profitability of securities firms
     B. Regulate and oversee the securities markets to protect investors
     C. Provide investment advice to the public
     D. Buy and sell securities on behalf of investors

 

229. The “price-to-earnings ratio” (P/E ratio) is calculated by:
     A. Dividing a company’s stock price by its net income
     B. Dividing a company’s earnings per share by its stock price
     C. Dividing a company’s stock price by its earnings per share
     D. Dividing a company’s total assets by its equity

 

230. Which of the following investment types offers the potential for the highest long-term growth?
     A. Corporate bonds
     B. Treasury bills
     C. Small-cap stocks
     D. Real estate

 

231. “Capital structure” refers to:
     A. The mixture of a company’s debt and equity financing
     B. The overall risk of a portfolio
     C. The allocation of assets across different sectors
     D. The total market value of a company’s stock

 

232. “Dollar-cost averaging” is a strategy that involves:
     A. Buying more shares when prices are high
     B. Purchasing an equal dollar amount of an investment at regular intervals
     C. Only purchasing bonds with a high yield
     D. Diversifying investments to minimize risk

 

233. In portfolio theory, “correlation” refers to:
     A. The relationship between two stocks’ returns, indicating how they move together
     B. The overall risk of the portfolio
     C. The total return from a portfolio of assets
     D. The volatility of a single stock in the portfolio

 

234. Which of the following is an advantage of “mutual funds”?
     A. They allow for individual stock selection
     B. They offer diversification and professional management
     C. They have no fees associated with the investment
     D. They are guaranteed to beat the market return

 

235. Which of the following is an example of a “growth stock”?
     A. A company with steady earnings and a high dividend yield
     B. A company with fast-growing earnings and reinvestment in the business
     C. A company with low earnings but a high dividend payout
     D. A company that focuses on paying off its debts

 

236. The “yield to maturity” (YTM) of a bond is:
     A. The amount of interest paid on the bond each year
     B. The price of the bond in the market
     C. The total return an investor can expect to earn if the bond is held to maturity
     D. The credit rating of the bond issuer

 

237. “Tactical asset allocation” refers to:
     A. Long-term strategic allocation of assets based on expected returns
     B. Short-term adjustments to a portfolio based on market conditions
     C. A passive approach that tracks market indices
     D. Allocating assets to a single investment class

 

238. Which of the following is NOT a feature of “preferred stock”?
     A. It pays a fixed dividend
     B. It has voting rights
     C. It is less volatile than common stock
     D. It has priority over common stock in receiving dividends

 

239. The “diversification” of a portfolio primarily reduces:
     A. Total return
     B. Tax liability
     C. Systematic risk
     D. Unsystematic risk

 

240. Which of the following is an advantage of “real estate investment trusts” (REITs)?
     A. They provide exposure to the real estate market without requiring direct property ownership
     B. They are guaranteed to provide high returns
     C. They are exempt from taxes at the corporate level
     D. They do not require a brokerage account to invest in

 

 

241. Which of the following best describes “systematic risk”?
     A. Risk that can be eliminated through diversification
     B. Risk associated with the overall market or economy
     C. Risk specific to a particular company or industry
     D. Risk related to interest rate changes only

 

242. “Arbitrage” in financial markets refers to:
     A. The process of buying and selling the same asset simultaneously to take advantage of price differences
     B. A strategy that involves holding assets for a long period of time
     C. The risk of investing in foreign currencies
     D. The process of issuing new stock to raise capital

 

243. Which of the following best explains the “capital asset pricing model” (CAPM)?
     A. It calculates the optimal portfolio allocation
     B. It evaluates the potential risk and return of an asset relative to its market
     C. It determines the market interest rate on bonds
     D. It shows the price movement of a stock in relation to market changes

 

244. Which of the following investment strategies involves investing in both stocks and bonds to achieve a balanced portfolio?
     A. Sector rotation
     B. Strategic asset allocation
     C. Tactical asset allocation
     D. Diversification

 

245. A bond’s “coupon rate” refers to:
     A. The bond’s market price relative to its face value
     B. The total return an investor can expect over the life of the bond
     C. The interest rate paid by the bond issuer based on the bond’s face value
     D. The amount of principal paid back to the bondholder at maturity

 

246. Which of the following is a key characteristic of a “junk bond”?
     A. It has a high credit rating
     B. It is issued by a government entity
     C. It has a low credit rating and higher yield
     D. It is guaranteed to provide a positive return

 

247. A “buy-and-hold” investment strategy is most appropriate for:
     A. Investors looking for short-term gains
     B. Investors seeking to minimize taxes
     C. Investors with a high risk tolerance
     D. Investors looking for long-term growth without frequent trading

 

248. A “liquidity ratio” measures:
     A. A company’s ability to meet its short-term debt obligations
     B. The total market value of a company’s stock
     C. The profitability of a company
     D. The rate of return on an investment portfolio

 

249. “Modern portfolio theory” emphasizes:
     A. Diversifying investments to maximize return without increasing risk
     B. Selecting the most volatile assets for higher returns
     C. Focusing solely on individual stock performance
     D. Ignoring market conditions and focusing only on asset allocation

 

250. Which of the following is a key feature of “exchange-traded funds” (ETFs)?
     A. ETFs are bought and sold at the end of the trading day only
     B. ETFs are actively managed by a portfolio manager
     C. ETFs provide low-cost diversification in a single trade
     D. ETFs are only available for institutional investors

 

251. “Convertible bonds” are bonds that:
     A. Can be exchanged for a specified number of shares of the issuing company’s stock
     B. Pay a fixed interest rate but cannot be sold before maturity
     C. Offer a high coupon rate but no redemption options
     D. Are issued by government agencies only

 

252. “Hedge funds” are investment vehicles that typically:
     A. Require a minimum investment and are limited to accredited investors
     B. Invest only in government bonds
     C. Are managed by government entities to reduce market volatility
     D. Only invest in real estate assets

 

253. A “call option” gives the buyer the right to:
     A. Sell an asset at a specified price before a certain date
     B. Buy an asset at a specified price before a certain date
     C. Purchase an asset at market price at any time
     D. Receive dividends from an underlying stock

 

254. The “risk-return tradeoff” in investing refers to:
     A. The inverse relationship between risk and return
     B. The need to take on more risk in order to achieve higher returns
     C. The process of maximizing returns while minimizing risk
     D. The ability to predict returns in the short term

 

255. The primary benefit of “international diversification” in a portfolio is:
     A. Increased returns from emerging markets
     B. Reduced risk through exposure to different global economic conditions
     C. Higher interest rates in foreign bonds
     D. Guaranteed returns regardless of market conditions

 

256. The “Sharpe ratio” measures:
     A. The total risk of an asset
     B. The relationship between an asset’s risk and its return
     C. The price movement of an asset in relation to the market
     D. The correlation between two asset returns

 

257. A “fixed-income” investment typically:
     A. Provides variable returns based on market conditions
     B. Offers guaranteed returns with little risk
     C. Pays a set amount of interest over a fixed period of time
     D. Is exclusively issued by government entities

 

258. “Systematic risk” can be reduced by:
     A. Diversifying across different industries and asset classes
     B. Buying stocks from the same industry
     C. Holding a single type of asset
     D. Investing solely in government bonds

 

259. Which of the following investment types has the highest potential for risk?
     A. Government bonds
     B. Corporate bonds
     C. Preferred stock
     D. Small-cap stocks

 

260. A “portfolio manager” is responsible for:
     A. Selecting and managing a mix of investments for clients
     B. Ensuring that a portfolio only contains high-risk assets
     C. Managing the investment decisions of the company’s stockholders
     D. Setting interest rates on bonds and loans

 

 

261. Which of the following is an example of a non-traditional investment vehicle?
     A. Mutual funds
     B. Bonds
     C. Real estate investment trusts (REITs)
     D. Treasury bills

 

262. What is the primary objective of “portfolio diversification”?
     A. To maximize returns by investing in high-risk assets
     B. To minimize overall risk by investing in different asset types
     C. To increase the tax efficiency of the portfolio
     D. To ensure that all assets are highly correlated

 

263. In a “bull market,” investors typically expect:
     A. A decrease in stock prices
     B. A rise in stock prices
     C. Interest rates to remain stable
     D. A drop in bond prices

 

264. “Behavioral finance” primarily focuses on:
     A. Analyzing company fundamentals to predict stock performance
     B. Understanding how psychological factors influence investor decisions
     C. Tracking market trends using statistical models
     D. Ensuring that portfolios comply with government regulations

 

265. The “price-to-earnings” (P/E) ratio is used to:
     A. Measure a company’s profitability
     B. Compare the market value of a company’s stock to its earnings
     C. Determine a company’s dividend yield
     D. Calculate a company’s debt-to-equity ratio

 

266. The “efficient frontier” in portfolio theory represents:
     A. A line that shows the highest possible return for a given level of risk
     B. A point where all assets have an equal level of risk
     C. The minimum return expected from a diversified portfolio
     D. A portfolio that only invests in bonds

 

267. “Market efficiency” suggests that:
     A. All public information is reflected in stock prices, making it impossible to “beat the market” consistently
     B. Investors can easily predict stock prices based on historical trends
     C. Only government regulations influence stock market prices
     D. Companies can easily manipulate stock prices by controlling information

 

268. An investor’s “time horizon” refers to:
     A. The amount of money needed to meet financial goals
     B. The length of time an investor expects to hold an investment
     C. The level of risk an investor is willing to take
     D. The duration of a bond or loan

 

269. Which of the following statements about “mutual funds” is true?
     A. They are typically only available to institutional investors
     B. They are passively managed to match market returns
     C. They allow investors to pool their money and invest in a diversified portfolio of assets
     D. They are exclusively composed of government bonds

 

270. A “put option” gives the buyer the right to:
     A. Buy an asset at a specific price
     B. Sell an asset at a specific price
     C. Receive a dividend from the underlying asset
     D. Borrow money using the asset as collateral

 

271. The “diversification benefit” is achieved when:
     A. All assets in a portfolio are from the same industry
     B. A portfolio includes different types of assets that behave differently under various market conditions
     C. A portfolio only includes government bonds
     D. The portfolio is highly concentrated in high-risk stocks

 

272. “Technical analysis” of stocks is based on:
     A. Studying the company’s fundamentals like earnings and assets
     B. Predicting stock price movements based on historical data and trends
     C. Evaluating economic conditions and interest rates
     D. Determining the long-term growth prospects of the company

 

273. Which of the following types of bonds is considered the least risky?
     A. Junk bonds
     B. Corporate bonds
     C. Municipal bonds
     D. Treasury bonds

 

274. A “high-yield bond” is another name for:
     A. Treasury bonds
     B. Corporate bonds with low credit ratings
     C. Bonds with a fixed interest rate
     D. Government bonds

 

275. “Dollar-cost averaging” is a strategy that involves:
     A. Investing a fixed amount of money at regular intervals, regardless of market conditions
     B. Investing in high-risk assets to maximize returns
     C. Timing the market to buy low and sell high
     D. Concentrating investments in a single asset to minimize risk

 

276. A “stock split” results in:
     A. A decrease in the market value of a stock
     B. A reduction in the number of shares outstanding
     C. A decrease in the dividend yield
     D. An increase in the number of shares outstanding without changing the total value

 

277. The “risk-free rate” is typically represented by:
     A. The return on government bonds, particularly short-term Treasury securities
     B. The average return on the stock market
     C. The return on high-yield corporate bonds
     D. The return on municipal bonds

 

278. In the context of mutual funds, the “expense ratio” refers to:
     A. The amount the fund charges for buying or selling shares
     B. The proportion of the fund’s assets used for administration and management fees
     C. The total return earned by the fund
     D. The taxes paid by the fund on its investments

 

279. “Exchange-traded funds” (ETFs) differ from mutual funds in that they:
     A. Can only be traded once per day at the net asset value (NAV)
     B. Are always actively managed
     C. Can be traded throughout the day on stock exchanges
     D. Require a large minimum investment

 

280. The “yield to maturity” (YTM) of a bond is:
     A. The bond’s current market price
     B. The interest rate that equates the bond’s future cash flows to its current price
     C. The total amount of dividends paid on the bond
     D. The bondholder’s capital gain

 

 

281. What is the primary purpose of “asset allocation” in investment strategy?
     A. To maximize returns by investing in only one asset type
     B. To spread investment risks across different types of assets
     C. To reduce transaction costs by investing in a small number of securities
     D. To focus on the short-term growth of a portfolio

 

282. Which of the following is a feature of a “bond ladder”?
     A. Bonds with the same maturity date
     B. Bonds with different coupon rates
     C. Bonds with staggered maturity dates to manage interest rate risk
     D. Bonds that are highly speculative

 

283. “Modern portfolio theory” suggests that:
     A. Investors can reduce portfolio risk by holding a large number of securities in a single asset class
     B. A perfectly diversified portfolio eliminates all risk
     C. Portfolio diversification can reduce risk while maintaining expected returns
     D. The best portfolio is composed of high-risk, high-return assets

 

284. Which of the following is a characteristic of “common stock”?
     A. It pays a fixed dividend
     B. It represents ownership in a company
     C. It has priority over preferred stock in receiving dividends
     D. It provides guaranteed returns

 

285. An investor is considering investing in a stock with a low beta. This suggests that the stock:
     A. Is highly volatile compared to the market
     B. Moves in the opposite direction of the market
     C. Has low volatility relative to the market
     D. Is correlated with market movements

 

286. Which of the following is a risk associated with investing in mutual funds?
     A. Market risk, which affects the entire fund
     B. The risk of fraud from fund managers
     C. The risk that the fund will not charge management fees
     D. The risk of portfolio underperformance due to poor individual stock choices

 

287. Which of the following best describes a “call option”?
     A. It gives the holder the right to buy an asset at a specified price within a certain time frame
     B. It gives the holder the obligation to sell an asset at a specified price
     C. It provides the right to receive dividends on the underlying asset
     D. It guarantees the purchase of an asset at market price

 

288. A “hedge fund” typically:
     A. Requires investors to be accredited or institutional investors
     B. Is highly regulated by the SEC
     C. Focuses on long-term investments in government securities
     D. Operates exclusively within the stock market

 

289. What is “systematic risk”?
     A. Risk that can be eliminated through diversification
     B. Risk related to the specific performance of individual assets
     C. Risk that affects the entire market or economy
     D. Risk associated with interest rate changes only

 

290. In “capital market theory,” the efficient market hypothesis (EMH) asserts that:
     A. All information is freely available to all investors
     B. Investors can achieve consistent outperformance of the market through skill
     C. Asset prices always reflect all available information
     D. Investors should focus solely on fixed-income securities

 

291. Which of the following is a disadvantage of investing in “index funds”?
     A. They offer high management fees compared to actively managed funds
     B. They provide a way to outperform the overall market consistently
     C. They offer automatic diversification across a broad range of stocks
     D. They track a broad market index, which can limit potential returns in a booming sector

 

292. The “Sharpe ratio” is used to measure:
     A. The total return of an investment
     B. The risk-adjusted return of an investment
     C. The correlation between an asset’s price and the market
     D. The absolute risk of an investment

 

293. In a “bear market,” investors generally expect:
     A. A rise in stock prices
     B. A decline in stock prices
     C. Interest rates to stay the same
     D. A stable bond market

 

294. What is the primary difference between “exchange-traded funds” (ETFs) and “mutual funds”?
     A. ETFs are actively managed, while mutual funds are passively managed
     B. Mutual funds are traded throughout the day, while ETFs are traded only at market close
     C. ETFs trade on an exchange like a stock, while mutual funds are bought and sold through the fund company
     D. Mutual funds invest exclusively in bonds, while ETFs only invest in stocks

 

295. A “growth stock” typically:
     A. Pays regular dividends to investors
     B. Has a low price-to-earnings (P/E) ratio
     C. Is expected to grow at an above-average rate compared to the market
     D. Focuses primarily on generating steady income for investors

 

296. “Convertible bonds” are unique in that they:
     A. Can be exchanged for the issuer’s stock at a predetermined price
     B. Have a fixed interest rate and maturity date
     C. Are issued by corporations only
     D. Are not affected by interest rate movements

 

297. The “price-to-book” (P/B) ratio is used to assess:
     A. The profitability of a company
     B. The market value of a company’s stock relative to its book value
     C. The risk of investing in government bonds
     D. The dividend yield of a stock

 

298. Which of the following is the main goal of “corporate governance”?
     A. To improve the stock performance of a company
     B. To ensure that the company’s managers act in the best interests of shareholders
     C. To regulate the company’s dividends
     D. To enhance the company’s social responsibility initiatives

 

299. Which of the following is a key feature of a “high-yield” or “junk” bond?
     A. It offers a low interest rate
     B. It is issued by companies with high credit ratings
     C. It offers higher returns to compensate for increased credit risk
     D. It is exempt from tax obligations

 

300. A “cash flow statement” primarily provides information about:
     A. A company’s ability to pay dividends to shareholders
     B. The changes in a company’s equity over time
     C. The inflow and outflow of cash within a company
     D. A company’s revenue and expenses during a given period

 

 

301. What does “portfolio diversification” help to achieve?
     A. Higher returns by concentrating investments in one asset class
     B. Reducing the overall risk of the portfolio by spreading investments across different asset classes
     C. Maximizing returns by investing in high-risk assets only
     D. Minimizing tax liability for the investor

 

302. What is the main purpose of “technical analysis” in investment strategy?
     A. To predict future price movements based on historical price data and trading volume
     B. To evaluate the intrinsic value of a stock based on its fundamentals
     C. To identify companies with the best dividend-paying history
     D. To assess the potential return of a portfolio using quantitative models

 

303. Which of the following best describes “systematic risk”?
     A. Risk that can be diversified away by holding a wide variety of assets
     B. Risk related to a specific company or industry
     C. Risk that affects the entire market or a significant portion of it
     D. Risk associated with inflation and government policy

 

304. Which of the following is a characteristic of an “ETF” (exchange-traded fund)?
     A. It can only be bought or sold at the end of the trading day
     B. It is actively managed by a portfolio manager
     C. It is traded on an exchange like a stock and typically tracks an index
     D. It is only available for institutional investors

 

305. Which of the following is a key advantage of investing in a “mutual fund”?
     A. Higher management fees due to active management
     B. Greater exposure to individual stocks and higher risk
     C. Automatic diversification across a variety of assets
     D. Exclusive access to government bonds

 

306. The “capital asset pricing model” (CAPM) is used to determine:
     A. The intrinsic value of an asset
     B. The risk and expected return of an asset
     C. The market risk premium for a specific stock
     D. The dividend yield for a specific stock

 

307. What is the primary advantage of investing in “preferred stock”?
     A. Higher risk and potentially higher returns than common stock
     B. The right to vote in corporate decisions
     C. Fixed dividends that are paid before common stock dividends
     D. The ability to influence company decisions

 

308. Which of the following investment vehicles offers tax-exempt income?
     A. Corporate bonds
     B. Treasury bonds
     C. Municipal bonds
     D. Dividend-paying stocks

 

309. In “value investing,” an investor focuses on:
     A. Stocks that are currently overpriced in the market
     B. Companies with strong future growth prospects
     C. Stocks that are trading for less than their intrinsic value
     D. Short-term fluctuations in stock prices

 

310. Which of the following is an example of a “derivative”?
     A. Treasury bond
     B. Stock option
     C. Exchange-traded fund (ETF)
     D. Real estate investment trust (REIT)

 

311. Which of the following is a risk associated with investing in “junk bonds”?
     A. They are highly liquid and easy to sell
     B. They offer low yields and low risk
     C. They are subject to the risk of default due to the issuer’s low credit rating
     D. They are exempt from government regulations

 

312. “Dollar-cost averaging” refers to:
     A. A strategy where an investor invests a fixed amount of money at regular intervals, regardless of the asset’s price
     B. A strategy that focuses on buying assets with the highest short-term returns
     C. The process of actively timing the market for the best entry point
     D. A method for reducing transaction fees through large lump-sum investments

 

313. What does the “beta” of a stock measure?
     A. The stock’s total return over a specific period
     B. The stock’s volatility in relation to the overall market
     C. The company’s price-to-earnings (P/E) ratio
     D. The company’s dividend yield relative to its earnings

 

314. Which of the following is a typical feature of a “growth stock”?
     A. High dividend yield
     B. A low price-to-earnings (P/E) ratio
     C. High expected future earnings growth
     D. A strong emphasis on steady income generation

 

315. What is a “fixed-income security”?
     A. A type of investment that pays a fixed interest rate or dividend
     B. An asset that fluctuates in value depending on market conditions
     C. A security that is not affected by interest rate changes
     D. A type of investment that primarily focuses on capital appreciation

 

316. A “put option” gives the holder the right to:
     A. Buy an asset at a specified price within a certain time frame
     B. Sell an asset at a specified price within a certain time frame
     C. Receive dividends from the underlying asset
     D. Purchase a bond at par value

 

317. Which of the following is a “capital gain”?
     A. Interest earned on a bond
     B. The profit made from selling an asset at a higher price than the purchase price
     C. Dividends paid by a company to its shareholders
     D. Rent earned from real estate investments

 

318. The “dividend yield” of a stock is calculated as:
     A. The price-to-earnings (P/E) ratio divided by the earnings per share
     B. The annual dividend divided by the stock’s market price
     C. The market price divided by the stock’s book value
     D. The price of the stock divided by its future earnings

 

319. Which of the following is an advantage of investing in “real estate investment trusts” (REITs)?
     A. They allow investors to buy property directly and manage it
     B. They provide diversification and income through property investments without directly owning the properties
     C. They do not require investors to pay taxes on rental income
     D. They are highly speculative and only suitable for high-risk investors

 

320. A “credit default swap” is an example of a financial instrument used to:
     A. Hedge against interest rate risk
     B. Protect against the default of a bond issuer
     C. Trade shares of stock in an exchange-traded market
     D. Calculate the market risk of an individual stock

 

 

321. What is the primary objective of “modern portfolio theory” (MPT)?
     A. To maximize returns while ignoring risk
     B. To minimize risk through diversification of assets
     C. To only invest in government bonds for guaranteed returns
     D. To select individual stocks that outperform the market

 

322. Which of the following is true about a “growth stock”?
     A. It typically pays high dividends to investors
     B. It has a higher potential for price appreciation, but lower stability
     C. It is often considered a “safe” investment with consistent returns
     D. It focuses on generating income through dividends, not capital appreciation

 

323. A bond’s “coupon rate” refers to:
     A. The price paid to purchase the bond
     B. The bond’s yield in the secondary market
     C. The annual interest payment as a percentage of the bond’s face value
     D. The tax rate applied to the bondholder’s income

 

324. Which of the following is a risk associated with investing in foreign stocks?
     A. Foreign stock prices are always more volatile
     B. The risk of currency fluctuations impacting returns
     C. Foreign stocks cannot be traded on U.S. exchanges
     D. Foreign stocks are exempt from taxation

 

325. A “call option” gives the holder the right to:
     A. Sell an asset at a specified price within a certain time frame
     B. Buy an asset at a specified price within a certain time frame
     C. Receive dividends from an underlying asset
     D. Buy an asset at a predetermined discount rate

 

326. The “Sharpe ratio” is used to:
     A. Measure the risk-adjusted return of an investment or portfolio
     B. Determine the expected return on an investment based on market conditions
     C. Compare the liquidity of different assets
     D. Calculate the total market capitalization of a company

 

327. Which of the following best describes “front-end load” fees for mutual funds?
     A. Fees paid when you sell the mutual fund
     B. Fees paid when you purchase the mutual fund
     C. Fees that are charged by the government for mutual fund investments
     D. Fees paid to the broker for trading a mutual fund

 

328. What is the purpose of a “buy and hold” investment strategy?
     A. To make frequent trades to capitalize on short-term market fluctuations
     B. To invest in assets with the goal of holding them for a long period, regardless of market volatility
     C. To focus solely on high-risk, high-return investments
     D. To diversify across multiple asset classes only for short-term gains

 

329. Which of the following is an example of a “non-systematic” risk?
     A. Inflation risk affecting all assets
     B. A specific company’s poor earnings report
     C. A sudden change in government monetary policy
     D. A natural disaster that affects the entire economy

 

330. Which of the following would most likely increase a bond’s price?
     A. An increase in interest rates
     B. A decrease in the credit rating of the bond issuer
     C. A decrease in market interest rates
     D. An increase in inflation expectations

 

331. What is a “Treasury bond”?
     A. A bond issued by private corporations
     B. A bond issued by the U.S. government with a maturity of more than 10 years
     C. A bond issued by state governments
     D. A bond issued by local governments

 

332. “Systematic risk” can be best reduced by:
     A. Diversifying across different asset classes
     B. Investing in high-risk, high-return assets
     C. Choosing assets with low correlation to the market
     D. Investing in a mix of international and domestic stocks

 

333. What does a “bull market” refer to?
     A. A period of declining stock prices
     B. A market where investors are pessimistic and sell assets
     C. A period of rising stock prices driven by optimism
     D. A market in which bonds are the dominant investment vehicle

 

334. What is a characteristic of “high-yield bonds”?
     A. They are typically issued by companies with a low credit rating and offer higher potential returns
     B. They are issued by government entities and are considered risk-free
     C. They are bonds that provide consistent and predictable returns with little risk
     D. They are only available to institutional investors

 

335. What is the main risk associated with “inflation-protected bonds”?
     A. The bond’s price may fluctuate with interest rates
     B. The bond may not protect against deflation
     C. The bond issuer could default on payments
     D. The bond may not provide sufficient income during high inflation periods

 

336. In the context of “investment strategies,” what does “asset allocation” refer to?
     A. The process of choosing specific securities to invest in
     B. The strategy of diversifying investments among different asset classes such as stocks, bonds, and cash
     C. The method of analyzing an asset’s price movement to predict future performance
     D. The technique of adjusting stock holdings based on macroeconomic forecasts

 

337. A “reverse stock split” results in:
     A. Shareholders receiving more shares, but the value of each share decreases
     B. Shareholders receiving fewer shares, but the value of each share increases
     C. An increase in a company’s market capitalization
     D. The issuance of new shares to the public

 

338. Which of the following describes “market efficiency”?
     A. The idea that all information is readily available and prices reflect all available information
     B. The theory that stock prices are always too high due to speculation
     C. A market where only insider traders can influence prices
     D. The process by which stocks become overvalued and then crash

 

339. Which of the following is a “blue-chip” stock?
     A. A stock from a small company with high growth potential
     B. A stock from a large, well-established company with a history of stable earnings
     C. A stock that is actively traded and highly speculative
     D. A stock that is primarily involved in speculative technology investments

 

340. Which of the following would an investor use to hedge against inflation?
     A. Investing in short-term bonds
     B. Investing in stocks of companies that perform well during inflationary periods
     C. Investing in cash-equivalent securities
     D. Holding only long-term fixed-rate bonds

 

 

341. Which of the following best describes a “mutual fund”?
     A. A pooled investment vehicle that invests in stocks, bonds, and other assets on behalf of its shareholders
     B. A stock that pays high dividends to shareholders
     C. A government bond that is available only to institutional investors
     D. A savings account offered by a bank with guaranteed returns

 

342. Which of the following best describes a “bear market”?
     A. A market where prices are rising and investors are optimistic
     B. A market where prices are falling and investors are pessimistic
     C. A market with no significant movement in asset prices
     D. A market dominated by government bonds

 

343. Which of the following is considered a “safe-haven” investment during periods of economic uncertainty?
     A. High-yield junk bonds
     B. Gold
     C. Technology stocks
     D. Real estate

 

344. A “dividend yield” is calculated by:
     A. Dividing the stock price by the dividend paid
     B. Dividing the dividend by the stock price
     C. Adding the dividend to the stock price
     D. Subtracting the stock price from the dividend

 

345. What is the “efficient frontier” in portfolio theory?
     A. A portfolio with the highest risk-return tradeoff
     B. The set of portfolios that offer the highest possible return for a given level of risk
     C. The set of bonds that offer the lowest interest rates
     D. A group of stocks with the same expected return

 

346. Which of the following is an advantage of investing in “exchange-traded funds” (ETFs)?
     A. They are typically only available to institutional investors
     B. They allow investors to buy and sell throughout the day like stocks
     C. They are guaranteed to provide returns higher than the market
     D. They are only composed of stocks in the technology sector

 

347. What is the primary difference between a “stock” and a “bond”?
     A. Stocks represent ownership in a company, while bonds represent debt
     B. Stocks pay fixed interest payments, while bonds offer variable returns
     C. Stocks are issued by governments, while bonds are issued by corporations
     D. Stocks are safer investments than bonds

 

348. What is the main purpose of a “stop-loss” order in stock trading?
     A. To prevent a stock from being sold too quickly
     B. To lock in profits once a stock reaches a certain price
     C. To limit losses by automatically selling a stock if its price drops to a specified level
     D. To buy a stock at a price below its current market value

 

349. Which of the following best describes a “high-yield bond”?
     A. A bond issued by the government with a guaranteed return
     B. A bond with a high interest rate but a higher level of risk due to the issuer’s creditworthiness
     C. A bond that pays low interest but has little to no risk
     D. A bond that is only available to wealthy investors

 

350. Which of the following is NOT a type of investment vehicle?
     A. Stocks
     B. Bonds
     C. ETFs
     D. Dividends

 

351. What is “portfolio diversification”?
     A. Investing in a single asset to minimize risk
     B. Spreading investments across various asset classes to reduce risk
     C. Focusing on high-risk assets for potentially higher returns
     D. Selling off assets to lock in profits

 

352. In the context of investment, what does “liquidity” refer to?
     A. The ability of an asset to be quickly bought or sold without affecting its price significantly
     B. The ability of an asset to generate high returns over a short period
     C. The risk level associated with an asset
     D. The amount of debt associated with a particular asset

 

353. What is a “beta” coefficient in stock market analysis?
     A. A measure of a stock’s volatility relative to the overall market
     B. A measure of the company’s total assets
     C. A prediction of the future price of a stock
     D. A measure of a stock’s dividend payments

 

354. A “bond rating” is determined by:
     A. The bond issuer’s total revenue
     B. The creditworthiness of the bond issuer, as evaluated by rating agencies
     C. The interest rate set by the central bank
     D. The maturity date of the bond

 

355. Which of the following is an example of a “primary market” transaction?
     A. Buying stock from another investor on the stock exchange
     B. Purchasing newly issued stock directly from the issuing company during an IPO
     C. Trading stocks through mutual funds
     D. Selling bonds in the secondary market

 

356. What is “systematic risk” also known as?
     A. Unsystematic risk
     B. Market risk
     C. Interest rate risk
     D. Liquidity risk

 

357. Which of the following is a characteristic of a “preferred stock”?
     A. It has no dividend payments
     B. It is lower in risk compared to common stock and has a fixed dividend
     C. It represents ownership but with no voting rights
     D. It offers higher potential for capital appreciation compared to common stock

 

358. Which of the following is an example of a “mutual fund’s net asset value” (NAV)?
     A. The total value of the fund’s shares divided by the number of shares outstanding
     B. The fund’s historical performance over the last 5 years
     C. The market price of the fund’s shares on the secondary market
     D. The interest rate the fund pays to investors

 

359. What is the primary goal of “asset allocation”?
     A. To select the best-performing asset in a given period
     B. To balance risk and return by diversifying investments among different asset classes
     C. To reduce the total amount of assets in a portfolio
     D. To concentrate on one type of asset for maximum returns

 

360. Which of the following is a “risky” investment type?
     A. Treasury bonds
     B. Money market accounts
     C. Junk bonds
     D. Certificate of deposit

 

 

361. Which of the following is the primary objective of the “capital asset pricing model” (CAPM)?
     A. To calculate the present value of an asset
     B. To determine the risk-return tradeoff of an asset or portfolio
     C. To calculate the net present value of a project
     D. To predict the future performance of stocks

 

362. In portfolio theory, “correlation” refers to:
     A. The measure of how two assets move in relation to each other
     B. The average return of an asset
     C. The diversification benefit of a single asset
     D. The total risk of a portfolio

 

363. What is a “bond’s coupon rate”?
     A. The total return an investor can expect from the bond
     B. The fixed interest payment the bond issuer makes to bondholders
     C. The price at which the bond is issued
     D. The maturity date of the bond

 

364. Which of the following is a characteristic of “exchange-traded funds” (ETFs)?
     A. They are only traded at the end of the day at the net asset value (NAV)
     B. They are actively managed by a fund manager
     C. They trade on stock exchanges like individual stocks
     D. They are always composed of government bonds

 

365. What is the “yield to maturity” (YTM) of a bond?
     A. The annual interest payment divided by the bond’s face value
     B. The rate of return an investor can expect to earn if the bond is held until it matures
     C. The difference between the purchase price and the face value of the bond
     D. The coupon rate of the bond

 

366. Which of the following best describes a “value stock”?
     A. A stock that is undervalued compared to its intrinsic value
     B. A stock with a high growth potential
     C. A stock that pays high dividends but has little room for capital appreciation
     D. A stock with a high price-to-earnings (P/E) ratio

 

367. Which type of investor is most likely to benefit from “dollar-cost averaging”?
     A. An investor looking to make one-time, large purchases
     B. An investor who invests fixed amounts regularly regardless of market conditions
     C. An investor focusing solely on high-risk investments
     D. An investor focusing only on short-term gains

 

368. Which of the following is a characteristic of “growth stocks”?
     A. They pay regular dividends to investors
     B. They typically have lower risk than value stocks
     C. They are expected to grow faster than the market, but may not pay dividends
     D. They are always undervalued compared to their intrinsic value

 

369. What is “modern portfolio theory” (MPT)?
     A. A theory that focuses on maximizing return without regard to risk
     B. A theory that recommends diversifying investments to reduce risk for a given level of return
     C. A theory that suggests investing only in high-risk assets
     D. A theory that concentrates on stock investments and ignores bonds

 

370. What is the “price-to-earnings” (P/E) ratio used to measure?
     A. The relationship between the price of a stock and the dividends it pays
     B. The relationship between the market price of a stock and its earnings per share (EPS)
     C. The rate at which a stock is expected to grow
     D. The price-to-book ratio of a stock

 

371. Which of the following best describes “asset-backed securities” (ABS)?
     A. Securities backed by real estate properties
     B. Debt securities backed by a pool of assets such as loans or receivables
     C. Stocks that are backed by government guarantees
     D. Commodities that are used as collateral for investments

 

372. What is the main risk associated with investing in “foreign stocks”?
     A. Currency risk, as changes in exchange rates can affect returns
     B. Low dividends compared to domestic stocks
     C. High transaction costs for buying and selling stocks
     D. Limited liquidity in the stock market

 

373. Which of the following is NOT a function of a “stock exchange”?
     A. Facilitating the buying and selling of securities
     B. Setting the prices of stocks
     C. Providing a venue for companies to issue new securities
     D. Regulating the financial markets

 

374. What does “duration” measure in the context of bonds?
     A. The amount of time until a bond matures
     B. The volatility of a bond’s price relative to changes in interest rates
     C. The annual coupon payment of a bond
     D. The total return of a bond over its life

 

375. Which of the following is an example of “systematic risk”?
     A. The risk associated with a company’s management decisions
     B. The risk associated with market-wide factors such as inflation or economic downturns
     C. The risk associated with a specific investment, such as a stock
     D. The risk that a company will default on its bond payments

 

376. What is a “REIT” (Real Estate Investment Trust)?
     A. A company that specializes in creating and managing stocks for institutional investors
     B. A company that allows individual investors to pool their money to invest in real estate properties
     C. A bond backed by government real estate projects
     D. A financial institution that primarily lends money to real estate developers

 

377. What is a “liquidity risk” in investment?
     A. The risk that an investor will lose money due to the default of an issuer
     B. The risk that an asset cannot be quickly sold without significantly affecting its price
     C. The risk of inflation eroding the value of returns
     D. The risk associated with a change in interest rates

 

378. Which of the following is a “commodity” investment?
     A. A bond issued by a government entity
     B. A mutual fund focused on technology stocks
     C. An investment in gold or oil
     D. A corporate stock with high dividend yield

 

379. What is a “hedge fund”?
     A. A mutual fund that invests in government securities
     B. A pooled investment fund that uses various strategies to generate returns for its investors
     C. A government-backed investment vehicle for low-risk investments
     D. A bond that guarantees a fixed return

 

380. What is the “Sharpe ratio”?
     A. A measure of an investment’s return compared to its risk
     B. A measure of the risk of an investment relative to its industry
     C. A measure of a company’s profitability
     D. A measure of the price-to-earnings ratio of an investment

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