Investment (Investor's Knowledge) 2

Question 1

What does diversification primarily aim to reduce in an investment portfolio?

Accepted Answer

Unsystematic (company-specific) risk

Answer

Inflation risk

Answer

Interest rate risk

Answer

Tax liability

Question 2

An investor's 'time horizon' refers to:

Accepted Answer

How long until the money is needed

Answer

The market's trading hours

Answer

The age of a stock listing

Answer

The duration of a bond's coupon

Question 3

Which account allows tax-free qualified withdrawals in retirement in the US?

Accepted Answer

Roth IRA

Answer

Traditional 401(k)

Answer

Brokerage account

Answer

Money market account

Question 4

A P/E ratio measures a stock's price relative to its:

Accepted Answer

Earnings per share

Answer

Dividend yield

Answer

Book value

Answer

Trading volume

Question 5

Dollar-cost averaging involves:

Accepted Answer

Investing a fixed amount at regular intervals

Answer

Buying only when prices fall

Answer

Selling losers and holding winners

Answer

Timing market peaks and troughs

Question 6

Which investment generally carries the LOWEST risk?

Accepted Answer

US Treasury bills

Answer

Small-cap growth stocks

Answer

High-yield junk bonds

Answer

Cryptocurrency

Question 7

Compound interest is best described as earning interest on:

Accepted Answer

Both principal and accumulated interest

Answer

Only the original principal

Answer

Only reinvested dividends

Answer

The market index average