What is the formula for calculating compound interest? - A) P(1 + r/n)^(nt) - B) P(1 - r/n)^(nt) - C) P(1 + rt/n) - D) P(1 - rt/n)
A
Which financial ratio measures a company's ability to meet its short-term obligations? - A) Return on Investment (ROI) - B) Debt-to-Equity Ratio - C) Current Ratio - D) Price-to-Earnings (P/E) Ratio
C
In the context of investments, what does the Sharpe ratio assess? - A) Market liquidity - B) Portfolio risk-adjusted return - C) Stock volatility - D) Debt coverage ratio
B
Which statistical measure provides a snapshot of the spread or dispersion of a set of values? - A) Mean - B) Median - C) Variance - D) Standard Deviation
D
What is the primary purpose of the Capital Asset Pricing Model (CAPM) in finance? - A) Evaluate a company's creditworthiness - B) Estimate the cost of debt - C) Assess the risk and return of an investment - D) Analyze market liquidity
C
In bond pricing, what does the yield to maturity (YTM) represent? - A) Current market value of the bond - B) Annual interest payment - C) Total return anticipated on the bond if held until it matures - D) Face value of the bond
C
What is the purpose of the Monte Carlo simulation in financial modeling? - A) Estimate future cash flows - B) Assess investment risk through multiple scenarios - C) Determine the optimal stock price - D) Calculate present value
B
Which type of risk is associated with the variability of returns caused by changes in interest rates? - A) Market risk - B) Credit risk - C) Interest rate risk - D) Operational risk
C
What does the efficient frontier represent in portfolio theory? - A) The optimal mix of assets that maximizes return for a given level of risk - B) The total market value of a company's outstanding shares - C) The ratio of debt to equity in a company - D) The rate of return on an investment
A
Which financial concept is measured by beta in the context of investments? - A) Market risk - B) Inflation risk - C) Liquidity risk - D) Credit risk