Stock Market & Investing Test

What is the primary purpose of a stock market?

• To provide companies capital and investors returns

• To regulate corporate financial activities

• To control inflation within the economy

• To collect taxes from corporations

What does a share of stock represent?

• A promise to pay regular dividends

• A unit of ownership in a company

• A contract with a licensed stock broker

• A loan provided directly to a company

Which of the following best describes a bull market?

• A market condition with rising stock prices

• A market where trading volume is high

• A market dominated by institutional investors

• A market where stock prices remain stable

When a company sells stock to the public for the first time, it is called:

• Market capitalization

• Stock dividend distribution

• Portfolio diversification

• Initial Public Offering (IPO)

What term describes the total market value of all outstanding shares?

• Dividend yield ratio

• Market capitalization

• Book value of equity

• Price-to-earnings ratio

Which of the following is NOT a major U.S. stock exchange?

• FTSE (Financial Times Stock Exchange)

• NASDAQ exchange

• NYSE (New York Stock Exchange)

• AMEX (American Stock Exchange)

A bear market is characterized by:

• High trading volumes daily

• Stable stock prices for long periods

• Increasing investor optimism

• Market condition with falling prices

What is a dividend?

• A portion of company profits paid to shareholders

• A tax on stock market gains

• A fee paid to brokers for stock trades

• The difference between buying and selling prices

Which factor would most likely cause stock prices to rise?

• Increasing national interest rates

• Strong company earnings reports

• Political instability in global markets

• Rising unemployment rates

What is a diversified portfolio?

• Stocks invested only in foreign markets

• Investments spread across asset classes

• Investments all within the same industry

• Investments managed by several brokers