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Investment, Risk and Taxation > Chat GPT Questions > Flashcards

Chat GPT Questions Flashcards

1
Q

What is the primary goal of active management in investment?
a) To match the returns of the benchmark index.
b) To generate returns in excess of the benchmark index.
c) To minimize the risk of investments.
d) To buy and hold assets for the long term.

A

Answer: b) To generate returns in excess of the benchmark index.

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2
Q

What does AIM stand for in the context of the London Stock Exchange?
a) Alternative Investment Market
b) Active Investment Management
c) Association of British Insurers
d) Annual Equivalent Rate

A

Answer: a) Alternative Investment Market.

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3
Q

In finance, what does “Alpha” refer to?
a) The first letter of the Greek alphabet.
b) The return from a security or portfolio in excess of a risk-adjusted benchmark return.
c) The highest share price in a given year.
d) A type of government bond.

A

Answer: b) The return from a security or portfolio in excess of a risk-adjusted benchmark return.

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4
Q

What does AER stand for in the financial context?
a) Annual Expenditure Ratio
b) Asset Equity Ratio
c) Annual Equivalent Rate
d) Aggregate Expense Ratio

A

Answer: c) Annual Equivalent Rate

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5
Q

What is the process of deriving a risk-free profit from buying and selling the same asset in two different markets called?
a) Arbitrage
b) Asset Allocation
c) Beta Analysis
d) Diversification

A

Answer: a) Arbitrage.

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6
Q

What is the term for the division of assets in an investment portfolio based on an investor’s financial goals and risk tolerance?
a) Alpha
b) Asset Allocation
c) Correlation
d) Market Capitalization

A

Answer: b) Asset Allocation.

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7
Q

What is the name for the system used to issue securities where successful applicants pay the price that they bid?
a) IPO (Initial Public Offering)
b) Auction
c) Offer Price
d) Dividend Yield

A

Answer: b) Auction.

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8
Q

Which organization represents the collective interests of the UK’s insurance industry?
a) London Stock Exchange
b) Financial Conduct Authority
c) Association of British Insurers
d) Bank of England

A

Answer: c) Association of British Insurers.

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9
Q

What does the term “Beta” measure in finance?
a) The difference between bid and offer prices.
b) The relationship between a stock’s returns and market returns.
c) The annual compound return from holding a bond to maturity.
d) The dividend paid by a company to its shareholders.

A

Answer: b) The relationship between a stock’s returns and market returns.

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10
Q

What is the difference between the bid and offer prices for a financial instrument known as?
a) Coupon
b) Dividend Yield
c) Bid-Offer Spread
d) Gross Redemption Yield

A

Answer: c) Bid-Offer Spread.

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11
Q

What is the term for the total market value of a company’s outstanding shares of stock?
a) Asset Allocation
b) Market Capitalization
c) Beta
d) Dividend Yield

A

Answer: b) Market Capitalization.

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12
Q

In finance, what does “Bear Market” refer to?
a) A market where investors are optimistic and share prices are rising.
b) A market with no price fluctuations.
c) A market where share prices are persistently declining.
d) A market with extremely high volatility.

A

Answer: c) A market where share prices are persistently declining.

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13
Q

What are the beneficial owners of property held in a trust, will, or life insurance policy called?
a) Investors
b) Stakeholders
c) Beneficiaries
d) Shareholders

A

Answer: c) Beneficiaries.

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14
Q

What financial ratio measures the systematic risk of a security or portfolio in comparison to the market as a whole?
a) Alpha
b) Beta
c) Correlation
d) Standard Deviation

A

Answer: b) Beta.

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15
Q

What is the term for the price at which an investor can sell a financial instrument?
a) Bid Price
b) Offer Price
c) Clean Price
d) Yield to Maturity

A

Answer: a) Bid Price.

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16
Q

What is the difference between the bid and ask (offer) prices of a financial instrument called?
a) Gross Redemption Yield
b) Clean Price
c) Dividend Yield
d) Bid-Offer Spread

A

Answer: d) Bid-Offer Spread.

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17
Q

What are “Green Bonds” typically used to finance?
a) Renewable energy projects
b) Luxury real estate developments
c) Military defense contracts
d) Fast-food restaurant chains

A

Answer: a) Renewable energy projects.

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18
Q

What type of investment approach seeks to incorporate environmental, social justice, and corporate governance factors?
a) Active Management
b) Ethical Investing
c) Passive Management
d) Hedge Fund Investing

A

Answer: b) Ethical Investing.

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19
Q

Which index represents the 100 largest listed company shares on the London Stock Exchange?
a) FTSE 100
b) S&P 500
c) Dow Jones Industrial Average
d) Nasdaq Composite

A

Answer: a) FTSE 100.

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20
Q

What does “Diversification” involve in investment strategy?
a) Concentrating investments in a single asset to maximize returns.
b) Spreading risk by investing in a range of investments.
c) Selling assets as soon as they show any decline in value.
d) Investing only in high-risk, high-reward assets.

A

Answer: b) Spreading risk by investing in a range of investments.

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21
Q

What does “Dividend” refer to in finance?
a) The interest paid on a bond.
b) The distribution of profits by a company to shareholders.
c) The price of a stock.
d) The cost of borrowing money.

A

Answer: b) The distribution of profits by a company to shareholders.

22
Q

What is the name for the tax on capital gains made when a chargeable asset is disposed of?
a) Income Tax
b) Corporate Tax
c) Capital Gains Tax (CGT)
d) Value Added Tax (VAT)

A

Answer: c) Capital Gains Tax (CGT).

23
Q

What is the role of central banks in a country’s financial system?
a) To make profitable investments on behalf of the government.
b) To regulate the stock market.
c) To control the money supply and set short-term interest rates.
d) To provide loans to individuals for purchasing homes.

A

Answer: c) To control the money supply and set short-term interest rates.

24
Q

What international organization works on transitioning the global bond markets to a low carbon and climate-resilient economy?
a) World Trade Organization (WTO)
b) United Nations (UN)
c) International Monetary Fund (IMF)
d) Climate Bonds Initiative (CBI)

A

Answer: d) Climate Bonds Initiative (CBI).

25
Q

What is the term for the quoted price of a bond that excludes accrued interest?
a) Clean Price
b) Dirty Price
c) Coupon Price
d) Offer Price

A

Answer: a) Clean Price.

26
Q

Which type of investment organization is typically characterized by a fixed size as determined by its share capital?
a) Closed-Ended
b) Open-Ended
c) Mutual Fund
d) Hedge Fund

A

Answer: a) Closed-Ended.

27
Q

What is the term for items like sugar, wheat, oil, and copper that are traded as commodities?
a) Equities
b) Bonds
c) Derivatives
d) Commodities

A

Answer: d) Commodities.

28
Q

What index measures the movement of prices faced by a typical consumer?
a) Consumer Prices Index (CPI)
b) Producer Price Index (PPI)
c) Gross Domestic Product (GDP)
d) Retail Price Index (RPI)

A

Answer: a) Consumer Prices Index (CPI).

29
Q

What is a “Convertible Bond” in finance?
a) A bond with a variable interest rate.
b) A bond that can be converted into a certain number of shares of the issuing company.
c) A bond issued by the government.
d) A bond with a very long maturity period.

A

Answer: b) A bond that can be converted into a certain number of shares of the issuing company.

30
Q

What does “Correlation” measure in finance?
a) The extent to which different types of investments move in tandem.
b) The price difference between the bid and offer prices of a bond.
c) The annual dividend payment on a stock.
d) The interest rate on a government bond.

A

Answer: a) The extent to which different types of investments move in tandem.

31
Q

What is “Counterparty Risk” in finance?
a) The risk that a company’s stock price will go up.
b) The risk of investing in foreign currencies.
c) The risk that a counterparty in a transaction cannot fulfill its obligations.
d) The risk associated with investing in stocks.

A

Answer: c) The risk that a counterparty in a transaction cannot fulfill its obligations.

32
Q

What is the regular amount of interest paid on a bond called?
a) Principal
b) Maturity
c) Yield
d) Coupon

A

Answer: d) Coupon.

33
Q

What does “Cum-Dividend” (cum-div) refer to in finance?
a) The period when share or bond purchases entitle the holder to the next dividend or interest payment.
b) The period when no dividends are paid to shareholders.
c) The period when a company’s stock is performing exceptionally well.
d) The period when a stock’s price is at its peak.

A

Answer: a) The period when share or bond purchases entitle the holder to the next dividend or interest payment.

34
Q

What does “Current Account” measure in the context of an economy?
a) The total assets and liabilities of a country.
b) The balance of trade in goods and services.
c) The government’s annual budget.
d) The amount of foreign currency reserves.

A

Answer: b) The balance of trade in goods and services.

35
Q

What are financial instruments whose price is derived from an underlying asset or benchmark called?
a) Bonds
b) Stocks
c) Equities
d) Derivatives

A

Answer: d) Derivatives.

36
Q

What is the price of a bond that includes any accrued interest called?
a) Clean Price
b) Coupon Price
c) Dirty Price
d) Offer Price

A

Answer: c) Dirty Price.

37
Q

What investment strategy involves spreading risk by investing in a range of investments?
a) Diversification
b) Concentration
c) Speculation
d) Leverage

A

Answer: a) Diversification.

38
Q

What is the distribution of profits by a company to shareholders called?
a) Dividend Allowance (DA)
b) Dividend Payment (DP)
c) Dividend Yield
d) Dividend Distribution (DD)

A

Answer: c) Dividend Yield.

39
Q

What financial measure can be used to estimate the price sensitivity of a bond to small changes in interest rates?
a) Duration
b) Beta
c) Yield to Maturity (YTM)
d) Correlation

A

Answer: a) Duration.

40
Q

What government scheme offers tax reliefs to investors who purchase new shares in small, higher-risk trading companies?
a) Enterprise Investment Scheme (EIS)
b) Pension Scheme
c) Social Investment Scheme (SIS)
d) Government Bond Scheme (GBS)

A

Answer: a) Enterprise Investment Scheme (EIS).

41
Q

What is the term for the rate at which an investment grows over time, taking into account compounding interest?
a) Nominal Rate
b) Simple Interest Rate
c) Annual Percentage Rate (APR)
d) Compound Annual Growth Rate (CAGR)

A

Answer: d) Compound Annual Growth Rate (CAGR).

42
Q

Which of the following is not a commonly traded precious metal?
a) Gold
b) Silver
c) Platinum
d) Aluminum

A

Answer: d) Aluminum.

Key Point: Gold, silver, and platinum are often traded as precious metals due to their rarity and intrinsic value.

43
Q

What is the term for a financial instrument that derives its value from an underlying asset, but can also be settled with a cash payment?
a) Equity
b) Option
c) Future
d) Swap

A

Answer: b) Option.

Key Point: Options give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price.

44
Q

In the context of bonds, what does “Yield to Maturity” (YTM) represent?
a) The annual interest rate paid by the bond.
b) The total return an investor can expect if the bond is held until it matures.
c) The current market price of the bond.
d) The bond’s credit rating.

A

Answer: b) The total return an investor can expect if the bond is held until it matures.

Key Point: YTM considers both interest payments and any capital gains or losses upon maturity.

45
Q

What type of investment strategy aims to replicate the performance of a specific market index?
a) Active Management
b) Ethical Investing
c) Passive Management
d) Hedge Fund Investing

A

Answer: c) Passive Management.

Key Point: Passive management strategies, like index funds, seek to match the returns of a chosen benchmark.

46
Q

What is the term for the risk associated with changes in interest rates affecting bond prices?
a) Credit Risk
b) Market Risk
c) Inflation Risk
d) Interest Rate Risk

A

Answer: d) Interest Rate Risk.

Key Point: Rising interest rates can lead to a decrease in bond prices.

47
Q

Which financial statement provides a snapshot of a company’s financial position at a specific point in time?
a) Income Statement
b) Balance Sheet
c) Cash Flow Statement
d) Statement of Retained Earnings

A

Answer: b) Balance Sheet.

Key Point: The balance sheet shows a company’s assets, liabilities, and shareholders’ equity.

48
Q

What is the term for an investment strategy that aims to profit from short-term price movements in financial markets?
a) Value Investing
b) Day Trading
c) Dollar-Cost Averaging
d) Buy and Hold

A

Answer: b) Day Trading.

49
Q

Key Point: Day traders buy and sell financial instruments within the same trading day.

What type of investment typically represents ownership in a corporation and carries voting rights for shareholders?
a) Preferred Stock
b) Common Stock
c) Treasury Stock
d) Municipal Bond

A

Answer: b) Common Stock.

Key Point: Common stockholders have a stake in the company’s ownership and often have voting rights.

50
Q

What does the term “Liquidity” refer to in finance?
a) The ease with which an asset can be quickly converted into cash without significant loss of value.
b) The total value of a company’s assets.
c) The amount of money a company has on hand.
d) The percentage of a portfolio allocated to stocks.

A

Answer: a) The ease with which an asset can be quickly converted into cash without significant loss of value.

Key Point: Liquidity is essential for investors who may need to access their funds quickly.

Investment, Risk and Taxation (15 decks)

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