Investment Vocabulary Quiz
12 multiple-choice questions on investment and finance vocabulary: dividends, equity, bonds, yield, portfolio, IPO, diversification, liquidity and more. B2 level.
This quiz focuses on how the target vocabulary for Investment is actually used in context at B2 level, rather than testing bare definitions. Correct answers you will need to identify include terms such as dividend, equity, bond, yield and diversification, each embedded in a full example sentence so you have to judge meaning from context, not just recognise an isolated word.
Working through all 12 questions and checking the explanations in the FAQ below is a quick way to spot any terms you are still unsure of. Revisiting the quiz again after a day or two, rather than only once, is one of the most reliable ways to move new vocabulary from passive recognition into words you can use confidently yourself in speaking and writing.
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Investment Vocabulary — FAQ
What is a 'dividend'?
A dividend is a payment made by a company to its shareholders from its profits. It is typically paid quarterly or annually and expressed as an amount per share. Not all companies pay dividends; growth-focused companies often reinvest profits instead.
What is 'equity' in investment?
Equity refers to ownership in a company, represented by shares. Equity holders are entitled to a share of profits (dividends) and any increase in share value. Equity is riskier than debt but offers higher potential returns.
What is a 'bond' in finance?
A bond is a debt instrument where you lend money to an issuer in exchange for regular interest payments (the coupon) and the return of the principal at maturity. UK government bonds are called gilts. Bond prices and interest rates move in opposite directions.
What does 'yield' mean in investment?
Yield is the income return on an investment expressed as a percentage. For bonds, it is the annual interest divided by price. For shares, it is the annual dividend divided by share price. A higher yield may indicate higher income but also higher risk.
What is 'diversification'?
Diversification spreads money across different asset types, sectors and geographies to reduce risk. If one investment falls, others may not, limiting overall loss. The saying 'don't put all your eggs in one basket' captures the principle.
What is an 'IPO'?
An IPO (Initial Public Offering) is when a private company offers shares to the public for the first time, listing them on a stock exchange. It allows the company to raise capital and gives investors an opportunity to buy shares at the outset, though newly listed companies can be volatile.
What is 'liquidity' in finance?
Liquidity is how easily an asset can be converted to cash without significantly affecting its price. Cash is most liquid; property and private equity are less liquid. Liquidity risk is the risk of not being able to sell an asset quickly at a fair price.
What is a 'hedge fund'?
A hedge fund is a pooled investment fund that uses sophisticated strategies including leverage, short selling and derivatives. Hedge funds are usually only open to institutional investors or high-net-worth individuals and face less regulatory oversight than retail funds.
What does 'portfolio' mean in investment?
An investment portfolio is the collection of all financial assets held by an individual or organisation, such as shares, bonds, cash and property. Portfolio management involves allocating money across different assets to meet financial goals while managing risk.
What is 'compound interest'?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This causes savings to grow exponentially over time. For example, £1,000 at 5% compound interest for two years gives £1,102.50, not £1,100.