Investment Investment/Questions/Investment 1

Question 1

What is the primary benefit of compound interest?

Accepted Answer

Earnings generate additional earnings over time

Answer

Interest is paid only on the original principal

Answer

Interest rates are guaranteed to remain fixed

Answer

Taxes on gains are deferred indefinitely

Question 2

Which of the following best describes dollar-cost averaging?

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of price

Answer

Buying a stock only when its price is at its lowest point

Answer

Splitting an investment equally among different asset classes

Answer

Selling investments when they reach a predetermined price target

Question 3

What does the term 'beta' measure in relation to a stock?

Accepted Answer

A stock's price volatility relative to the overall market

Answer

The stock's dividend yield compared to the market

Answer

The ratio of a company's debt to its equity

Answer

The percentage of earnings paid out as dividends

Question 4

What is a mutual fund?

Accepted Answer

A pooled investment vehicle managed by a professional that holds a diversified portfolio

Answer

A government-issued bond with a fixed interest rate

Answer

A type of savings account insured by the FDIC

Answer

A direct loan made by investors to a corporation

Question 5

Which term describes the strategy of investing in undervalued stocks trading below their intrinsic worth?

Accepted Answer

Value investing

Answer

Growth investing

Answer

Index investing

Answer

Momentum investing

Question 6

What does 'market capitalization' refer to?

Accepted Answer

The total value of a company's outstanding shares of stock

Answer

The total annual revenue generated by a company

Answer

The maximum price at which a stock can be traded

Answer

The amount of debt a company carries on its balance sheet