Vocab Guide

What does Diversification mean in economic terms? Convert this question into a statement: 'Diversification in economic terms involves...'

• Investing in a variety of assets to reduce risk.

• Investing exclusively in one asset to maximize returns.

• Focusing solely on domestic markets.

• Eliminating all types of risk in an economy.

Futures in trading refer to a standardized legal agreement to buy or sell a specific commodity or financial instrument at a predetermined price at a specified time in the future.

• A standardized legal agreement to buy or sell an asset at a predetermined price and future date.

• An agreement to invest in start-ups.

• A short-term borrowing contract.

• An option to buy or sell at market price.

Margin in the context of financial performance is defined as:

• The percentage of revenue remaining after deducting the cost of goods sold.

• The total profit generated from sales.

• The overall market share of a company.

• The ratio of net income to total liabilities.

What is the Basis in futures trading?

• The difference between the spot price and the futures price.

• The difference between the total contract value and the margin requirements.

• The fee charged for trading futures contracts.

• The term used for the expiration date of a futures contract.

Premium in futures contracts refers to the _____

• Extra cost over spot price

• Margin requirement

• Dividend yield

• Broker's commission

Definition of Amortization:

• It is the process of gradually reducing a debt over a period of time by making regular payments of both principal and interest.

• It is the process of quickly paying off only the interest on a loan.

• It is a method used to calculate the annual percentage rate on loans.

• It is the process of accumulating wealth through regular deposits into a savings account.

Define Mortgage in terms of property and loans. (Choose the correct definition)

• A mortgage is an unsecured loan that does not involve property.

• A mortgage is a secured loan in which property serves as collateral.

• A mortgage is a short-term property lease contract.

• A mortgage is a financial grant provided without any interest.

Collateral assets are

• Assets pledged as security to guarantee a loan

• Assets owned outright without any obligations

• Assets that depreciate over time

• Assets used only for investment purposes

Fiscal year is

• A period of 12 consecutive months used for accounting and financial reporting

• A calendar year

• A period of 6 months

• A quarter period

Profit in economic terms is defined as revenue minus cost.

• Total revenue minus total cost

• Total cost minus total revenue

• Total revenue multiplied by total cost

• Total revenue divided by total cost