Stock Market Basics Quiz: Stock Market Basics Quiz 1. * Please enter your name followed by the calendar day you were born (don't include year or month): 2. * Companies like their stocks to go up in value because: They make more money when their stocks are at a higher price. Part of the profits comes from the value of their stock. The higher the price of their shares, the more likely they are to make higher profits that year. All of the above None of the above 3. * If you own a share of stock, you: Own part of the company that issued the stock Have the right to vote if another company wants to buy the company whose stock you own Might receive a check every year that represents your share in the companies profits All of the above None of the above 4. * A stock is to a mutual fund as: A one dollar bill is to a five One broken egg is to a dozen A tree is to a forest Yoda is to Darth Vader 5. * Please explain the choice you made above an how it might be similar to the comparison between a stock and a mutual fund. If you are unsure, please type, "unsure" 6. * You are an enterprising high school student. You inherit $10,000 and want to use it to pay for your college education starting in a little over 2 years. You can’t afford to lose money, but you need more for college. Should you: Invest in the safest blue chip stocks since they will probably be worth a lot more in two years Avoid the stock market since 2 years is too long of a time to invest. Avoid the stock market since 2 years is too short of a time to invest. Find a broker so good he promises to increase your investment by 50% in time for college. 7. * You discover your great-great--grandfather named you in his will. The good news is that he left you stock in Coca-Cola. The bad news is that it is only one share he bought in 1919 (ten years before the Great Depression) for $40. How much is that share worth now? Nearly 1.8 million dollars. Barely enough to buy a year?s worth of Diet Cherry Coke. Nearly 7 million dollars. It has increased a hundredfold and is now worth $4,000. 8. * Which of these has the most effect on the price of stock? The opinion of investors about the future chances for the company. The general state of the economy. The performance of the stock market in general. How much the company earns in profits. 9. * You read that the Dow Jones Industrial average has gone down 500 points in the last two weeks. What does this mean to you as an investor: It?s time to sell since prices are headed the wrong direction. Nothing, since you did not invest in Dow Jones. Stocks that are part of the average are now cheaper to buy. Such a major fall in the index indicates serious problems for the economy. 10. * The efficient market theory states that: You can make money in stocks, but are unlikely to ?beat the market.? The market is so efficient that only professional stock traders and brokers can make money over the long term. You can make money in stocks but most of that is taken away by broker fees, commissions, and sales charges. I have no idea. Information about companies is available to everyone so that it is now nearly impossible to actually 11. * If a company listed on the New York Stock Exchange makes a profit it: Must declare a dividend payable to its shareholders during that year. Can pay a dividend with the profits or plow the money back into the company to make more profits. Must pay dividends unless it receives shareholder approval to use the profit for other purposes. Increases the value of the stock by the amount of the dividend. Insures that the price of its stock does not drop in value. I have no idea. 12. * When you buy a share of stock, the money you pay for it is: Divided among the stock market, the broker, and the company who issued the stock. Sent directly to the company in which you invested (after subtracting brokerage fees) for whatever business use it sees fit. Is sent to the company but how it is used is carefully regulated by the Securities and Exchange Commission. Goes (after subtracting brokerage fees) to some other person who wants to sell the stock. I am not a Robot
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