What Is A Stock?

Which task specifically focuses on analyzing information over a period of time?

• Explain what stocks are and how they can make money

• Identify ways to minimize risk when investing in stocks

• Read a stock quote and evaluate a stock’s performance over time

• Understand what a stock split is and how it impacts investors who own that stock

Company A is raising $1 million at its initial public offering (IPO) by issuing 2,000 shares of stock. What is the value of each share?

• $250

• $500

• $2,000

• $5,000

Julia buys a share of stock through her brokerage firm. What are the two ways that Julia could make money from owning this stock?

• Receiving dividends paid by the company

• Earning interest guaranteed by the government

• Selling the stock for more than she paid (capital gain)

• Getting a refund of brokerage fees

Julia knows that investing in just one company is risky since there’s a chance that the stock’s value could decrease. Which actions would help her minimize this risk? Select all that apply.

• Diversify by buying shares of different companies

• Invest all her money in a single company she likes

• Consider spreading purchases over time instead of all at once

• Hold only cash and never invest

You need to know how to read a stock quote so you can evaluate a stock’s performance. Based on this, what is the primary purpose of learning to read a stock quote?

• To memorize company slogans

• To determine whether a particular stock is a good investment option for you

• To predict the exact future price of a stock

• To learn how to avoid paying taxes

Why is it more useful to look at the percent change of a stock price rather than the change in dollar amount?

• Percent change allows for a fair comparison between stocks with different prices.

• Dollar amount change always shows a bigger impact.

• Percent change is only useful for expensive stocks.

• Dollar amount change is more accurate than percent change.

Nike is classified as which type of company based on its market capitalization, and what does market capitalization represent?

• A large cap company; Market capitalization represents the total value of a company's outstanding shares and is used to classify companies by size.

• A small cap company; Market capitalization represents the company's annual revenue and is used to classify companies by industry.

• A medium cap company; Market capitalization represents the company's profit margin and is used to classify companies by growth rate.

• A micro cap company; Market capitalization represents the company's number of employees and is used to classify companies by workforce size.

When comparing stock movements across different companies with different share prices, investors often focus on _______ change instead of dollar change because it lets them make fair, apples-to-apples comparisons.

• percent

• absolute

• nominal

• fixed

Company B’s stock price is $500. You overhear a classmate say, “Based on the stock price, Company B’s value is clearly higher than Nike’s!” Why might your classmate be wrong? Comparing companies only by stock price can be misleading because:

• Stock price does not account for the number of shares a company has.

• Stock prices are always the same for all companies.

• A higher stock price always means a bigger company.

• Stock price is the only factor that determines company value.

Understanding stock quotes is important for making investment decisions because it allows investors to analyze a company's performance, such as Nike's, and make informed choices. What is one specific insight a student might gain from learning how to read a stock quote?

• They can identify trends in stock prices over time.

• They can predict the exact future price of a stock.

• They can guarantee profits from every investment.

• They can avoid all risks associated with investing.