Capital Market Terminology

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6. What does the term “liquidity” mean in the context of the capital market?

a) The ability to easily buy or sell assets without impacting their prices

b) The profitability of a company

c) The total value of all assets held by a company

d) The risk associated with investing in a particular stock

Answer: a) The ability to easily buy or sell assets without impacting their prices
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7. What is a “stock index”?

a) A measure of the overall performance of a stock market or a specific sector

b) The price of a single stock listed on an exchange

c) The total value of all shares outstanding in a company

d) The average price of a basket of commodities

Answer: a) A measure of the overall performance of a stock market or a specific sector
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8. What does the term “market capitalization” refer to?

a) The total value of all shares outstanding in a company

b) The annual revenue generated by a company

c) The total debt owed by a company

d) The amount of capital a company can raise from the market

Answer: a) The total value of all shares outstanding in a company
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9. What is a “derivative” in the capital market?

a) A financial instrument whose value is derived from another underlying asset

b) A low-risk investment option

c) A type of bond issued by the government

d) A short-term loan provided by banks to companies

Answer: a) A financial instrument whose value is derived from another underlying asset
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10. What is the “bid-ask spread” in the capital market?

a) The difference between the highest and lowest bid prices for a security

b) The interest rate charged by a bank on loans provided to companies

c) The annual dividend yield of a stock

d) The trading volume of a specific stock

Answer: a) The difference between the highest and lowest bid prices for a security
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