1. What is the primary role of a financial market?
To set fixed prices for goods To match buyers and sellers at an agreed price To guarantee profits To eliminate risk
2. Which group's trading decisions are least likely to move a major market on their own?
Central banks Large hedge funds An individual retail trader Major institutional investors
3. What's the key difference between trading and investing?
Investing is short-term and trading is long-term Trading targets shorter-term price movement, investing targets long-term value growth They are exactly the same activity Investing always involves leverage
4. Why does compounding reward starting early?
Because early investors get better tax treatment Because returns are earned on a continuously growing base, so more time means more compounding cycles Because prices are always lower early in life It doesn't matter when you start
5. What best describes "passive income"?
Income requiring daily active decision-making Income earned with little ongoing effort once set up, like dividends or interest A synonym for day trading Income that always beats active income