Intro to Stock Market

True or False? When a company is formed, its owner(s) decide whether it will be privately held or publicly traded. The company remains in that category for the rest of its lifespan.

• True

• False

Which of the following statements about dividends is TRUE?

• Dividends are earned when you sell your shares for a higher price than when you bought them

• Dividends are typically set between $20 and $30 per share

• Dividends cannot legally be reinvested in the same company where they were earned

• Dividends are usually paid quarterly by well established publicly traded companies

Wanda bought a share in Tasty Ice Cream for $25 on March 1. On June 13, Tasty Ice Cream’s shares were trading for $23.50. What happens if she sells her share on June 13?

• Wanda will make $1.50 by selling her share.

• Wanda will receive her full $25 purchase price back, but she won’t make any profit.

• Wanda cannot sell her share on June 13; she must wait for the price to go above $25 in order to sell.

• Wanda will receive $23.50 for her share, meaning she lost $1.50 on the investment

When it comes to buying stock in a company like Nike or Netflix...

• You should listen to experts on TV stations such as CNBC since they are generally right when it comes to picking good investments

• It is generally easy for most investors to predict the direction of future stock prices

• You should sell the stock a soon as possible so that you can make a profit

• It is much more risky to invest in individual stocks (like Nike or Netflix) compared to investing in an index fund made up of a collection of stocks

Mark whether each of these statements about stock indexes is true.

• The Dow, S&P 500, and Nasdaq all measure the same stocks but in different quantities.

• Unlike individual company stocks, which can fall in value, stock indexes always go up in value.

• If the S&P 500 goes up 12 points, that means each of the 500 stocks must have gone up 12 points.

• Stock brokers and individual investors can use the indexes to get a sense of how the market is performing.

• All countries trade on the same stock markets and, therefore, use the same 3 stock indexes to assess performance.

True or False. A stockbroker is always required to act in a client's best interests and is held to a fiduciary standard.

• True

• False

Which of the following are examples of U.S. stock market indices (plural of index)?

• NASDAQ Composite

• Amazon stock

• S&P 500

• Nike stock

• Dow Jones Industrial

Which of the following statements about Initial Public Offerings are TRUE?

• IPOs are less risky than a typical stock market investment (i.e. investing in McDonald's or Coca-Cola) since they are typically smaller companies

• An IPO occurs when a private company sells stock to the public for the first time

• When an IPO occurs, a company raises money from public investors that they use to grow their business

• IPOs are risky investments since the company going public often has a limited track record of performance

• One benefit of “going public (another term for an IPO)” is that a public company has less regulation than a private one

What is the most money that an investor could lose if they buy 40 shares of ElectricCarCo for $25/share

• Loss of $25

• Loss of $1,000

• $0

• Lose $1,500

• Lose more than $1,500

Sam and Jessica have a contest to see who can earn more profit by investing $1,000 in the stock market. Sam buys 50 shares of SmartphoneCo for $20/share. Jessica buys 200 shares of Juice Co for $5/share. A year later, Sam sells his SmartPhoneCo stock for $22/share, and Jessica sells her JuiceCo stock for $7/share. Whose figures below are correct when it comes to calculating their profits?

• Sam profit was $1100, and Jessica’s profit was $1,400

• Sam and Jessica both had a total profit of $2

• Sam had a profit of $100, and Jessica had a profit of $400

• Sam and Jessica both had a total profit of $1,000