Investment (Investor's Knowledge) 3

Question 1

An ETF differs from a mutual fund primarily because it:

Accepted Answer

Trades on exchanges throughout the day

Answer

ETFs trade intraday on exchanges like stocks, whereas mutual funds price once per day.

Question 2

A bond's price typically moves in which direction when interest rates rise?

Accepted Answer

Down

Answer

Bond prices fall when interest rates rise because existing bonds become less attractive.

Question 3

What is an investor's 'risk tolerance'?

Accepted Answer

Their willingness and ability to endure losses

Answer

Risk tolerance is how much volatility and potential loss an investor can comfortably accept.

Question 4

Which is a characteristic of a blue-chip stock?

Accepted Answer

Large, established, financially sound company

Answer

Blue-chip stocks are shares of large, reputable, financially stable companies.

Question 5

Asset allocation refers to:

Accepted Answer

Dividing a portfolio among asset classes

Answer

Asset allocation is how an investor distributes funds across stocks, bonds, cash, and other classes.

Investment Practice Test