financial market

The Dow Jones Industrial Average is:

• An index of the stock prices of 30 large US companies

• A government agency that regulates financial markets

• A type of bond issued by the US Treasury

• An investment fund that tracks the performance of the S&P 500

The yield on a bond is:

• The rate of return an investor earns on a bond

• The price of the bond divided by the face value of the bond

• The annual divided by the face value of the bond

• The difference between the face value of the bond and the market price of the bond

What is the purpose of diversification in a portfolio?

• To maximize returns by investing in a single asset class

• To increase the risk of the portfolio by investing in different asset classes

• To reduce the risk of the portfolio by investing in different asset classes

• To eliminate the need for rebalancing the portfolio

What is the purpose of a stock index?

• To track the performance of a specific stock

• To track the performance of a specific sector of the stock market

• To track the performance of the entire stock market

• To predict future stock market trends

According to the Capital Asset Pricing Model (CAPM), what is the expected return on an asset that has a beta of 1.5, a risk-free rate of 2%, and a market risk premium of 5%?

• 5.5%

• 6.5%

• 7.5%

• 9.5%

How does an increase in a company's debt affect its Weighted Average Cost of Capital (WACC)?

• It increases the WACC

• It decreases the WACC

• It has no effect on the WACC

• It depends on the company's beta

What is the difference between a common stock and a preferred stock?

• Common stock holders have voting rights while preferred stock holders do not

• Preferred stock holders have voting rights while common stock holders do not

• Common stock holders receive fixed dividends while preferred stock holders do not

• Preferred stock holders receive fixed dividends while common stock holders do not

Which of the following is a money market instrument that is issued by the US government?

• Municipal bond

• Treasury bill

• Corporate bond

• None of them

Which of the following is a disadvantage of investing in the stock market?

• High liquidity

• High volatility

• Potential for high returns

• Low risk

Which of the following is an example of a stock market index?

• All of the them

• NASDAQ

• New York Stock Exchange (NYSE)

• S&P 500