Stock Market Test

Question 1

Stock

Answer 1

opportunity to be part owner in a company

Question 2

Shareholder

Answer 2

owner of a stock

Question 3

debt financing

Answer 3

when a company borrows money by taking a loan from a bank or by issuing bonds - this money has to be paid back

Question 4

Equity Financing

Answer 4

the act of raising money for companies by selling preferred or common stock

Question 5

IPO (initial public offering)

Answer 5

The 1st sale of stocks when individual businesses buy directly from the company

Question 6

Primary market

Answer 6

an ipo, meaning you buy stock directly from the company

Question 7

Secondary Market

Answer 7

individuals buying stock from another individual or business not the actual company

Question 8

common stock

Answer 8

most stock is this, ownership in a company, dividends, investors get 1 vote to elect board members and they are paid after everyone else if something happens to the company

Question 9

Preferred stock

Answer 9

represents some degree of larger ownership in a company, guaranteed a fixed dividend forever, they are paid first if liquidation occurs

Question 10

dividends

Answer 10

money paid to shareholder in return for the investment

Question 11

portfolio diversification

Answer 11

the practice of holding a large # of dif stocks so that increases in some stocks can offset declines in another

Question 12

brokers

Answer 12

people who link buyers and sellers of stock

Question 13

specialist

Answer 13

someone whose job is to match buyers with sellers

Question 14

commision

Answer 14

a fee

Question 15

odd lots

Answer 15

amounts less than 100

Question 15

lots

Answer 15

amounts of 100

Question 16

Dow Jones Industrial Average

Answer 16

a price weighted average of 30 significant stocks traded on the NYSE and the NASDAQ

Question 17

Bull Market

Answer 17

increasing market

Question 18

Bear Market

Answer 18

decreasing market

Question 19

short selling

Answer 19

sell now promise to buy back later

Question 20

OTC

Answer 20

over the counter market - where other stocks are traded especially from corporations who can’t meet the NYSE standards

Question 21

NASDAQ

Answer 21

the largest electronic screen-based equity securities trading market in the us

Question 22

ticker symbol

Answer 22

unique code for each business

Question 23

how is risk limited for stock holders?

Answer 23

investments where their initial money cant be lost

Question 24

why do stocks become available in the first place?

Answer 24

companies need money

Question 25

explain the difference between equity and debt financing. choose which one you think is better and why.

Answer 25

debt is where you borrow money from the bank equity is when you put stocks out into the world equity is better

Question 26

when does the company whose stock is being traded make money off of the sales?

Answer 26

when the stock is bought

Question 27

do most companies pay dividend?

Answer 27

only a few

Question 28

why do companies offer different classes of stock?

Answer 28

usually to ensure a specific group has special voting privileges

Question 29

what is the general trend in the stock market over time?

Answer 29

growing

Question 30

how do you make money from the stock market?

Answer 30

buy low sell high short sell dividends portfolio diversification

Question 31

what do people usually mean when they are referring to the stock market?

Answer 31

the NYSE

Question 32

hwo is trading done in the NYSE?

Answer 32

face to face

Question 33

what must brokers do to buy or sell stocks on the NYSE?

Answer 33

buy a seat

Question 34

how are prices determined on the floor of the stock market?

Answer 34

the auction method

Question 35

how many trading posts are on the NYSE floor?

Answer 35

17

Question 36

how many companies is each trading post responsible for?

Answer 36

approx 177

Question 37

what does the price of the stock indicate?

Answer 37

reflects the companies percieved value of the stock

Question 38

what have computers enabled stock traders to do?

Answer 38

make it possible to handle thousands of sales each second

Question 39

how many companies trade on the NYSE?

Answer 39

3,000

Question 40

what causes prices to change in the stock market?

Answer 40

supply and demand profitability market capitalization external forces investors sentiments

Question 41

what do investors expect during a bear market?

Answer 41

price drop

Question 42

what do investors expect during a bull market?

Answer 42

price rise

Question 43

how do investors expect to make a profit short selling?

Answer 43

they assume they will be able to buy the stock back at a lower amount than the price at which they sold short

Question 44

what are 2 examples of external forces?

Answer 44

inflation, interest rates, elections, natural disasters, unemployment, international events, # of new houses being built

Question 45

be able to place the steps of purchasing a stock in chronological order

Answer 45

brokerage firm that has a seat firms have people who pass the info to a floor broker floor broker goes to specific trading posts specialist talks with broker and price determined using auction method trade is recorded, details are sent back to investment firm/brokerage and infor is relayed to client (computer first)

Question 46

what type of brokers are there?

Answer 46

full service and online/etraders

Question 47

how do brokers earn a profit?

Answer 47

commission

Question 48

be able to read a stock quote and identify the parts of it

Answer 48

yup

Question 49

what are options for stocks not listed on the NASDAQ?

Answer 49

amex, nyse, otc, if stocks arent on nasdaq, a broker can contact other brokers who might have clients interested in trading stock directly