Investment Test 2

Question 1

Which of the following enables the issue of shares by acting as a middleman in the transfer of funds between the company in need of financing and the general public?

Accepted Answer

Underwriter

Answer

Explanation:
Underwriters determine how risky an insurer's business is. By appropriately valuing investment risk, underwriting aids in the establishment of fair borrowing rates for loans, the establishment of appropriate premiums, and the creation of a market for securities.

Question 2

An ______ is a decentralized market in which members trade directly with one another rather than through a centralized exchange. It is made up of securities that are not traded on public markets.

Accepted Answer

Over-the-counter (OTC) market

Answer

Explanation:
Buying and selling stocks outside of an established stock market is referred to as OTC (over-the-counter). Penny stocks, bonds, derivatives, ADRs, and currencies are examples of OTC investments. OTC markets are electronic networks that allow two parties to trade with one another without the use of a dealer-broker.

Question 3

For the first time, new shares are issued and offered to the investing public in the ______ .

Accepted Answer

Primary market

Answer

Explanation:
The primary market is where securities are formed in order to be offered for the first time to investors. Above all, the primary market allows firms, governments, and others to raise cash by issuing new securities on an exchange. Stocks, corporate or government bonds, notes, and bills are examples of securities issued through a primary market.

Question 4

What does the acronym APR stand for?

Accepted Answer

Annual Percentage Rate

Answer

Explanation:
The yearly interest created by a sum charged to borrowers or paid to investors is known as the annual percentage rate (APR). APR is a percentage that represents the actual annual cost of money over the course of a loan or investment. This includes any transaction fees or additional expenditures, but not compounding. Consumers can compare APRs between lenders, credit cards, and investment products since they provide a bottom-line number.

Question 5

The is made up of exchanges and over-the-counter markets where publicly traded businesses' shares are issued and sold.

Accepted Answer

Stock market

Answer

Explanation:
The stock market is a marketplace for investors to buy and sell investments, most often stocks, which are ownership shares in a publicly traded firm.

Investment Practice Test

Investment Practice Test

Investment Test 2