Basics of the Stock Market

What is a share of stock?

• A loan given to a company

• A unit of ownership in a company

• A type of savings account

• A fee paid to a broker

What is the role of a broker in buying stocks?

• The broker issues new shares for the company

• The broker buys and sells stocks on behalf of investors and charges a commission

• The broker guarantees profits on stock investments

• The broker sets the price of stocks

What is an IPO?

• A type of dividend paid to shareholders

• The first sale of a company’s stock to the public

• A fee charged by the Securities and Exchange Commission (SEC)

• A type of bond issued by a corporation

What is the primary market?

• A market where investors trade stocks with each other

• A market where corporations sell new shares to raise capital

• A market where bonds are traded

• A market where real estate investments are made

What is a dividend?

• A fee paid to a broker for buying or selling stocks

• A portion of a corporation’s profits paid to shareholders

• The increase in the value of a stock over time

• The commission earned by a stockbroker

What does the P/E ratio represent?

• The total number of shares traded in a day

• The annual dividend payment per share

• The ratio of a stock’s price to its earnings per share

• The change in a stock’s price from the previous day

Why might an investor choose to buy stocks instead of keeping money in a savings account?

• Stocks are guaranteed to earn a profit

• Stocks typically offer higher returns than savings accounts, though they carry more risk

• Stocks are less risky than savings accounts

• Stocks are not affected by inflation

What is the purpose of the Securities and Exchange Commission (SEC)?

• To issue new shares of stock for corporations

• To enforce federal laws on securities and protect investors

• To act as a broker for individual investors

• To set the price of stocks on the stock exchange

What does the "Net Change" column in a stock table indicate?

• The total number of shares traded in a day

• The difference between the stock’s highest and lowest price for the day

• The change in the stock’s price from the previous day’s closing price

• The annual dividend payment per share

What is the main risk of investing in stocks?

• The stock price may decrease, resulting in a loss

• The stock price is guaranteed to increase over time

• The investor will have to pay high taxes on dividends

• The investor will lose money due to inflation