Stock Market Basics - Quiz

Lesson 1 – Stock Market Basics

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What is a stock?

A certificate of debt issued by a company.

A type of currency.

A type of bond.

A share of ownership in a company.

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What does a high P/E ratio indicate?

The company’s stock is over-valued.

The company’s stock is under-valued.

The company is facing bankruptcy.

The company is not making profits.

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What is the purpose of a stop-loss order?

To automatically buy a stock when it rises above a certain price.

To automatically sell a stock when it falls below a certain price.

To halt trading when the market is volatile.

To prevent insider trading.

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What type of stock gives shareholders the right to vote on company matters and receive dividends?

Common stock.

Preferred stock.

Convertible stock.

Warrant.

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What is an IPO?

It’s when a company buys back its shares from the stock market.

It’s when a company sells its shares to the public for the first time.

It’s when a private company becomes a public company without selling stock.

It’s a process where a company’s assets are sold off.

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How is the PEG ratio calculated?

Dividend Yield / Growth Rate.

Price-to-Book Value / Growth Rate.

Price-to-Earnings / Growth Rate.

Market Capitalization / Growth Rate.

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What does a PEG ratio less than 1 indicate?

The company is overvalued.

The company is undervalued.

The company has stopped growing.

The company is facing bankruptcy.

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What is the practice of diversification?

Investing all your money in one asset class.

Investing your money in a variety of assets.

Putting all your money in a savings account.

Buying shares of one company only.

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Which of the following is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company’s expected growth in the future?

Dividend Yield.

Pack ratio.

Market Capitalization.

PEG ratio.

10 / 20

What is whale investing?

Buying the most expensive stocks in the market.

Buying stocks of companies based on their size.

A strategy that combines the principles of value investing and momentum investing.

Investing only in blue-chip companies.

11 / 20

Which company was given as an example of a company that pays consistent dividends?

Amazon.

Microsoft.

Pfizer.

Facebook.

12 / 20

What are stock market indices used for?

Predicting individual stock prices.

Providing a snapshot of a country’s overall stock market performance.

Indicating the best time to buy stocks.

Determining the interest rates in a country.

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How are the prices of stocks determined?

By the CEO of the company.

By the government.

By supply and demand.

By the number of employees in the company.

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What type of order automatically buys a stock when it rises above a certain price?

Market order.

Limit order.

Stop-loss order.

Short sell order.

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What does a company’s balance sheet provide information about?

The company’s assets and liabilities.

The company’s marketing strategies.

The company’s future plans.

The company’s employee count.

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The S&P 500 index includes how many of the largest U.S. companies by market capitalization?

100.

200.

500.

1000.

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What does a P/E ratio of 10 indicate?

Investors are willing to pay $10 for every dollar of earnings.

The company’s earnings are 10 times the stock price.

The company’s earnings have grown by 10%.

The company’s stock price will increase by 10%.

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What type of stock has a higher claim on a company’s assets and earnings than common stock?

Convertible stock.

Warrant.

Preferred stock.

Growth stock.

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How is the total value of a company determined in the stock market?

By multiplying the number of shares by the price of each share.

By adding the price of each share.

By multiplying the number of shares by the annual earnings per share.

By subtracting the company’s liabilities from its assets.

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What is the term for the percentage of a company’s earnings paid out to shareholders in dividends?

Dividend Yield.

Dividend Ratio.

Payout Ratio.

Earnings Per Share.

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