Investment Investment MCQ 2

Question 1

Which type of risk can be eliminated through diversification?

Accepted Answer

Unsystematic risk

Answer

Unsystematic (company-specific) risk can be reduced or eliminated by holding a diversified portfolio.

Question 2

A bond's price and its yield typically have what relationship?

Accepted Answer

Inverse (move opposite)

Answer

Bond prices and yields move inversely; when yields rise, prices fall and vice versa.

Question 3

What does P/E ratio measure?

Accepted Answer

Price relative to earnings per share

Answer

The price-to-earnings ratio compares a stock's price to its earnings per share.

Question 4

Which investment is generally considered the lowest risk?

Accepted Answer

U.S. Treasury bills

Answer

U.S. Treasury bills are backed by the federal government and considered virtually risk-free.

Question 5

Dollar-cost averaging involves:

Accepted Answer

Investing fixed amounts at regular intervals

Answer

Dollar-cost averaging means investing a fixed amount regularly regardless of price.

Investment Practice Test