quiz 1

Question 1

saving

Answer 1

keeping money aside from your income, does not earn returns

Question 2

investing

Answer 2

buying assets expected to appreciate in the future, earns returns

Question 3

bond basics

Answer 3

-issues of debt
-interest payments
-low-risk low rewards

Question 4

stock basics

Answer 4

-stake of ownership
-voting rights and dividends
-higher risk, higher reward

Question 5

long term stock price driver

Answer 5

earnings power (As a company earns more money, its stock price tends to rise over the long-term)

Question 6

short term stock price driver

Answer 6

human behavior, news, and financial statements

Question 7

rule of 72

Answer 7

72 / interest rate = years to double money

Question 8

compound interest

Answer 8

interest earned on money that was previously earned as interest

Question 9

the average bear market % price decline

Answer 9

35.62%

Question 10

the average length of a bear market

Answer 10

289 days

Question 11

bear market definition

Answer 11

20% correction/decline from peak

Question 12

Confirmation bias

Answer 12

people naturally favor information that confirms their previously existing beliefs

Question 13

information bias

Answer 13

bias arising from measurement error

Question 14

loss aversion bias

Answer 14

loss is perceived as more severe than an equivalent gain

Question 15

hindsight bias

Answer 15

people convince themselves after an event that they accurately predicted it before it happened, which can lead people to conclude that they can accurately predict other events

Question 16

cognitive bias

Answer 16

an unconscious error in thinking that arises from the way people perceive the world and the information around them that determines how they make decisions

Question 17

anchoring bias

Answer 17

use of irrelevant information as a reference point(anchor) for making decisions about that security, such as the purchase price of a security

Question 18

primary markets

Answer 18

are used by the issuer(company) to raise capital;

Question 19

secondary markets

Answer 19

are transactions between investors

Question 20

price-weighted index

Answer 20

the index is based on the traded price of stocks that comprise the index basket constituents
- DJIA

Question 21

market-cap weighted index

Answer 21

the index is based on the market capitalization of each index constituent
- S&P 500

Question 22

equal-weighted index

Answer 22

price change in the index is based on the percentage return of each component
- Nasdaq-100

Question 23

types of market indices

Answer 23

equities index and fixed income index