Finance Questions On Investment: Trivia Quiz

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities and is usually operated by an investment company.

Compound interest refers to the interest that is paid on the initial amount deposited, as well as on the accumulated interest from previous periods that remains in the account. This means that the interest earned in each period is added to the principal amount, and subsequent interest is then calculated based on the new total. As a result, compound interest grows exponentially over time, allowing the account balance to increase at a faster rate compared to simple interest.

Credit refers to the ability to purchase goods or services immediately with the understanding that payment will be made at a later date. It involves a promise to repay the amount owed within a specified timeframe. This concept allows individuals or businesses to acquire necessary items or services without having to provide immediate payment. It is commonly facilitated through credit cards or loans, enabling individuals to make purchases and settle the debt at a later time.

An annuity refers to a payment that is made either to someone or an account, or received from someone or an account, on a yearly basis. It is a regular payment that occurs annually, rather than monthly or in any other time frame. An annuity can be either a fixed sum paid annually or a series of yearly payments, depending on the context.

The P/E ratio, or Price to Earnings ratio, is a financial metric used to evaluate the valuation of a company's stock. It is calculated by dividing the market price per share by the earnings per share. This ratio helps investors determine how much they are willing to pay for each dollar of earnings generated by the company. A higher P/E ratio generally indicates that investors have high expectations for future earnings growth, while a lower P/E ratio suggests lower expectations. Therefore, the correct answer is Price to Earnings ratio.

Stocks pay the highest returns in terms of interest compared to the other options listed. While U.S. Savings Bonds, Savings Accounts, and Certificates of Deposit (CDs) typically offer fixed or lower interest rates, stocks have the potential for higher returns as they represent ownership in a company. Stocks can generate income through dividends and also provide the opportunity for capital appreciation if the stock price increases over time. However, it is important to note that stocks also carry higher risks compared to the other options, as their value can fluctuate and there is no guarantee of returns.

A bond issued by one of the 50 States is not protected by the Federal government against loss. While the other options, such as U.S. Treasury Bond, U.S. Savings Bond, and a certificate of deposit at the bank, are all backed by the Federal government, a bond issued by a state does not have the same level of protection. State bonds are generally backed by the creditworthiness of the issuing state, meaning that if the state were to default on its debt obligations, bondholders may not receive full repayment.

The correct answer is "As long as there is an opportunity to earn interest, the present and future value of money is affected." This answer accurately explains the concept of the time value of money. It highlights that the value of money can change over time due to the potential to earn interest. This concept is essential in understanding the benefits of investing and the importance of managing money effectively.

The person contemplating a purchase is considering the opportunity cost of the decision. Opportunity cost refers to the value of the best alternative that is forgone when making a choice. In this case, the person is weighing the cost of the item against the benefits associated with it, and by doing so, they are also considering what they would have to give up or sacrifice by choosing to purchase the item.

The Dow Jones Industrial Average is a stock market index that represents 30 large, publicly traded companies in the United States. It is often used as a gauge of the overall health and performance of the US stock market.