Investment Investment Vehicles and Instruments 1

Question 1

What is an Exchange-Traded Fund (ETF)?

Accepted Answer

A fund that tracks an index and trades on a stock exchange like a stock

Answer

An ETF is a pooled investment fund that tracks an index, commodity, or asset class and trades on stock exchanges throughout the day.

Question 2

Which type of bond is issued by the U.S. federal government and considered one of the safest investments?

Accepted Answer

Treasury bond

Answer

U.S. Treasury bonds are issued by the federal government and backed by the full faith and credit of the United States, making them among the safest investments.

Question 3

What is a mutual fund?

Accepted Answer

A pooled investment vehicle managed by professionals that collects money from many investors

Answer

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities managed by professional fund managers.

Question 4

What does the term 'derivative' refer to in investing?

Accepted Answer

A financial contract whose value is derived from an underlying asset such as a stock or commodity

Answer

A derivative is a financial contract that derives its value from an underlying asset, index, or rate, such as options and futures contracts.

Question 5

What is a money market fund?

Accepted Answer

A low-risk mutual fund that invests in short-term, high-quality debt instruments

Answer

A money market fund invests in highly liquid, short-term debt instruments like Treasury bills and commercial paper, offering stability and modest returns.

Investment Practice Test

Investment Practice Test

Investment Investment Vehicles and Instruments 1