FFM Test Questions with Complete Solutions
2025
investing - ANSWER putting saved money to work so that it makes you even more
money
securities - ANSWER assets suitable for investment, including stocks, bonds, and mutual
funds
stocks - ANSWER shares of ownership in a corporation
What is the average rate of stock returns? - ANSWER 9.6%
What was the worst 20 year performance for stocks? - ANSWER A gain of 3% annually
Chance of making money in the stock market is: - ANSWER 66%
bond - ANSWER a debt instrument issued by an organization that promises repayment
at a specific time and the right to receive regular interest payments during the life on
the bond
portfolio - ANSWER collection of investments assembled to meet your investment goals
total return - ANSWER income an investment generates from current income and capital
gains
current income - ANSWER money received while you own an investment, usually
received regularly as interest, rent, or dividends
, interest - ANSWER charge for borrowing money; investors in bonds earn interest
capital gain - ANSWER increase in the value of an initial investment (less costs) realized
upon the sale of the investment
capital loss - ANSWER decrease in paper value of an initial investment; only realized if
sold
rate of return/yield - ANSWER total return on an investment expressed as a percentage
of its price
speculative risk - ANSWER involves the potential for either gain or loss; equity
investments might do either
Thought process of Investing: - ANSWER 1. Are you ready to invest
2. Decide why you want to invest
3. Where can you get the money to invest
4. What investment returns are possible
Diversification is the key to reducing market(systematic) risk. T or F. - ANSWER False
investment risk - ANSWER the possibility that the yield on an investment will deviate
from its expected return
risk premium - ANSWER the difference between a riskier investment's expected return
and the totally safe return on the T-bill
2025
investing - ANSWER putting saved money to work so that it makes you even more
money
securities - ANSWER assets suitable for investment, including stocks, bonds, and mutual
funds
stocks - ANSWER shares of ownership in a corporation
What is the average rate of stock returns? - ANSWER 9.6%
What was the worst 20 year performance for stocks? - ANSWER A gain of 3% annually
Chance of making money in the stock market is: - ANSWER 66%
bond - ANSWER a debt instrument issued by an organization that promises repayment
at a specific time and the right to receive regular interest payments during the life on
the bond
portfolio - ANSWER collection of investments assembled to meet your investment goals
total return - ANSWER income an investment generates from current income and capital
gains
current income - ANSWER money received while you own an investment, usually
received regularly as interest, rent, or dividends
, interest - ANSWER charge for borrowing money; investors in bonds earn interest
capital gain - ANSWER increase in the value of an initial investment (less costs) realized
upon the sale of the investment
capital loss - ANSWER decrease in paper value of an initial investment; only realized if
sold
rate of return/yield - ANSWER total return on an investment expressed as a percentage
of its price
speculative risk - ANSWER involves the potential for either gain or loss; equity
investments might do either
Thought process of Investing: - ANSWER 1. Are you ready to invest
2. Decide why you want to invest
3. Where can you get the money to invest
4. What investment returns are possible
Diversification is the key to reducing market(systematic) risk. T or F. - ANSWER False
investment risk - ANSWER the possibility that the yield on an investment will deviate
from its expected return
risk premium - ANSWER the difference between a riskier investment's expected return
and the totally safe return on the T-bill
