Investment Investment Vehicles and Instruments 3

Question 1

What is a futures contract?

Accepted Answer

An agreement to buy or sell an asset at a predetermined price on a specific future date

Answer

A savings plan that matures in the future

Answer

A stock prediction tool used by analysts

Answer

A retirement account with future-dated contributions

Question 2

What is a zero-coupon bond?

Accepted Answer

A bond that pays no periodic interest but is sold at a discount and redeems at face value

Answer

A bond with no credit risk

Answer

A bond with an interest rate of 0%

Answer

A bond that converts to stock at maturity

Question 3

What is an index fund?

Accepted Answer

A passively managed fund designed to replicate the performance of a specific market index

Answer

A fund managed by top-performing analysts to beat the market

Answer

A fund that only invests in international markets

Answer

A government-sponsored retirement fund

Question 4

What is a hedge fund?

Accepted Answer

A private, actively managed investment fund using diverse strategies to generate returns for accredited investors

Answer

A fund that only invests in agriculture and landscaping companies

Answer

A government-backed fund that hedges against inflation

Answer

A low-risk fund for retirees

Question 5

What is a convertible bond?

Accepted Answer

A bond that can be exchanged for a fixed number of shares of the issuing company's stock

Answer

A bond that converts from fixed to variable interest rates

Answer

A foreign bond converted to U.S. dollars

Answer

A bond that can be redeemed before maturity without penalty

Question 6

What is the primary difference between a stock and a bond?

Accepted Answer

Stocks represent ownership in a company while bonds represent a loan to a company or government

Answer

Stocks are safer than bonds

Answer

Bonds always offer higher returns than stocks

Answer

Stocks are issued only by the government