Listen to Episode 447
In this episode, I discuss the potential mis-selling of car finance and the impact it could have on consumers. I then conduct an investment-themed quiz before Andy talks about self-assessment tax returns and the penalties for late filing.
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Investment quiz
This episode contained the following quiz.
1. What is the primary factor that differentiates a growth stock from a value stock?
A. Dividend yield
B. Company size
C. Stock price volatility
D. Future earnings potential
**Answer: D. Future earnings potential**
2. What does the term 'alpha' signify in investment?
A. The risk-adjusted performance of an investment compared to a benchmark
B. The annual dividend yield of a stock
C. The fixed interest rate on a bond
D. The correlation of a stock with the overall market
**Answer: A. The risk-adjusted performance of an investment compared to a benchmark**
**3. What is a 'blue-chip' stock?**
A. A stock with a blue logo
B. A new and rapidly growing company's stock
C. A stock from a large, well-established, and financially sound company
D. A stock that is traded at a low price
**Answer: C. A stock from a large, well-established, and financially sound company**
**4. In the context of bonds, what does 'duration' measure?**
A. The time it takes for a bond to mature
B. The bond's sensitivity to interest rate changes
C. The annual interest payment of the bond
D. The credit rating of the bond
**Answer: B. The bond's sensitivity to interest rate changes**
**5. What is the main characteristic of a 'junk bond'?**
A. Low risk and low return
B. High credit rating
C. High yield due to high risk
D. Government-issued bond
**Answer: C. High yield due to high risk**
**6. What does 'short selling' involve?**
A. Selling stocks you own
B. Selling stocks you have borrowed
C. Selling stocks at a short price
D. Selling stocks quickly after buying
**Answer: B. Selling stocks you have borrowed**
**7. What is a 'hedge fund'?**
A. A fund that only invests in commodities to hedge against inflation
B. A private investment partnership with a flexible investment strategy
C. A fund that guarantees fixed returns
D. A fund that invests only in stocks
**Answer: B. A private investment partnership with a flexible investment strategy**
**8. What does 'leveraging' mean in investing?**
A. Reducing investment risk
B. Investing only in leveraged buyouts
C. Using borrowed money to increase potential returns
D. Focusing on long-term investments
**Answer: C. Using borrowed money to increase potential returns**
**9. What is the main advantage of an ETF (Exchange-Traded Fund) over a unit trust?**
A. Higher guaranteed returns
B. Ability to trade like a stock on an exchange
C. No management fees
D. Fixed interest payments
**Answer: B. Ability to trade like a stock on an exchange**
**10. What is a 'REIT'?**
A. A fund that invests in real estate properties
B. A government-issued real estate bond
C. A company that builds real estate properties
D. A type of real estate insurance
**Answer: A. A fund that invests in real estate properties**
**11. What is pound-cost averaging'?**
A. Investing a fixed amount to play the average move in pound/dollar exchange rate over a period of time
B. A strategy of investing a fixed amount at regular intervals, regardless of market conditions
C. Calculating the average cost of an investment in pounds
D. A method to reduce investment risk in currency trading
**Answer: B. A strategy of investing a fixed amount at regular intervals, regardless of market conditions**
**12. What is a 'put option' in stock trading?**
A. The option to put more money into a stock
B. The right to sell a stock at a predetermined price
C. The option to change stock brokers
D. The right to buy a stock at a predetermined price
**Answer: B. The right to sell a stock at a predetermined price**
**13. What is 'diversification' in investing?**
A. Investing in a variety of asset classes to reduce risk
B. Focusing on a single sector to maximize returns
C. Investing in international markets only
D. Buying and selling assets frequently
**Answer: A. Investing in a variety of asset classes to reduce risk**
Resources:
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