Fundamentals Flashcards
7 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fundamentals flashcards as text
What is compound interest?
Answer: Interest earned on both principal and previously accumulated interest
Compound interest grows because it accrues on both the principal and the interest already earned.
What does 'IPO' stand for?
Answer: Initial Public Offering
An IPO (Initial Public Offering) is when a private company first sells shares to the public.
What is the difference between a stock and a bond?
Answer: A stock is ownership; a bond is a loan to the issuer
Stocks grant ownership equity, while bonds are debt that must be repaid with interest.
What does 'volatility' measure in financial markets?
Answer: The degree of variation in an asset's price over time
Volatility quantifies how much an asset's price fluctuates, often used as a risk measure.
What is a mutual fund?
Answer: A pooled investment vehicle managed professionally for many investors
A mutual fund pools money from many investors and is professionally managed across a diversified portfolio.
What does 'bear market' describe?
Answer: A prolonged period of falling prices, often 20% or more
A bear market is a sustained decline in prices, commonly defined as a drop of 20% or more.
What is the primary goal of risk management in investment firms?
Answer: Identifying and controlling potential losses
Risk management focuses on identifying, measuring, and mitigating potential losses across the firm.