FFM Test Questions with Complete
Solutions 2025
risk averse - ANSWER in investments, one who tends to dislike risk and is unable to put
money into investments that seem risky
moderate investment philosophy - ANSWER investors with this philosophy ~accept
some risk as they seek capital~ gains through slow and steady growth in
investment value along with current income
Aggressive investors seek out investments with low levels of risk. T or F. -
ANSWER False; higher levels of risk
aggressive investment philosophy - ANSWER investors with this philosophy primarily
seek capital gains, often with a short time horizon
debts - ANSWER lending investments that typically offer both a fixed maturity and
a fixed income
fixed maturity - ANSWER specific date on which a borrower agrees to repay the
principal to the investor
, fixed income - ANSWER specific rate of return that a borrower agrees to pay
the investor for us of the principal (initial investment)
equities - ANSWER ownership equities such as common or preferred stocks, equity
mutual funds, real estate, and so on that focus on capital gains more than on income
real rate of return - ANSWER return on an investment after subtracting the effects
of inflation and income taxes
random risk - ANSWER associated with owning only one investment of a particular
type, that by chance, may do very poorly in the future due to uncontrollable or random
factors that don't affect the rest of the market
What is the key to reducing random risk? - ANSWER Diversification
diversification - ANSWER process of reducing risk by spreading investment
money among several different investment opportunities
-reduces portfolio volatility
market risk - ANSWER the possibility for an investor to experience losses due to
unknown factors that affect the overall performance of the financial markets
financial risk - ANSWER possibility that an investment will fail to pay a return to
the investor
business-cycle risk - ANSWER the fact that economic growth usually doesn't occur in
a smooth and steady manner, and this impacts profits as well as investment returns
Solutions 2025
risk averse - ANSWER in investments, one who tends to dislike risk and is unable to put
money into investments that seem risky
moderate investment philosophy - ANSWER investors with this philosophy ~accept
some risk as they seek capital~ gains through slow and steady growth in
investment value along with current income
Aggressive investors seek out investments with low levels of risk. T or F. -
ANSWER False; higher levels of risk
aggressive investment philosophy - ANSWER investors with this philosophy primarily
seek capital gains, often with a short time horizon
debts - ANSWER lending investments that typically offer both a fixed maturity and
a fixed income
fixed maturity - ANSWER specific date on which a borrower agrees to repay the
principal to the investor
, fixed income - ANSWER specific rate of return that a borrower agrees to pay
the investor for us of the principal (initial investment)
equities - ANSWER ownership equities such as common or preferred stocks, equity
mutual funds, real estate, and so on that focus on capital gains more than on income
real rate of return - ANSWER return on an investment after subtracting the effects
of inflation and income taxes
random risk - ANSWER associated with owning only one investment of a particular
type, that by chance, may do very poorly in the future due to uncontrollable or random
factors that don't affect the rest of the market
What is the key to reducing random risk? - ANSWER Diversification
diversification - ANSWER process of reducing risk by spreading investment
money among several different investment opportunities
-reduces portfolio volatility
market risk - ANSWER the possibility for an investor to experience losses due to
unknown factors that affect the overall performance of the financial markets
financial risk - ANSWER possibility that an investment will fail to pay a return to
the investor
business-cycle risk - ANSWER the fact that economic growth usually doesn't occur in
a smooth and steady manner, and this impacts profits as well as investment returns
