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WorksheetsChapter 8 - Stock Market Quiz
Total questions: 65
Worksheet time: 33mins
What rights and returns are associated with common stock ownership?
Voting rights and fixed dividends
Voting rights and potential capital gains
Fixed dividends and guaranteed returns
No voting rights and fixed interest
How do stock exchanges function?
By setting fixed prices for stocks
By facilitating the buying and selling of stocks
By issuing new stocks to the public
By providing loans to investors
What is the purpose of stock indexes?
To track the performance of individual stocks
To track the wider stock market
To provide investment advice
To calculate stock dividends
What is the P/E ratio model used for?
Calculating stock dividends
Assessing relative stock values
Determining stock ownership rights
Tracking stock market trends
What is a source of financial capital aside from debt?
Equity
Loans
Grants
Donations
How do public corporations raise money?
By issuing bonds
By issuing stocks
By taking loans
By selling assets
Why are investors willing to buy company stock?
Because they can receive dividends
Because they can sell the stock during any trading day
Because they can influence company decisions
Because they can get tax benefits
What determines the form of business ownership?
Market demand
Organizational structure
Government regulations
Company size
What is common stock?
A type of bond issued by a corporation
An ownership stake in a corporation
A government-issued security
A fixed-income investment
Which of the following factors does NOT affect the market value of common stock?
Company's profitability
Growth prospects for the future
Current market interest rates
The color of the company's logo
What are common stockholders considered as?
Primary creditors
Residual claimants
Preferred shareholders
Bondholders
What is the primary function of stock exchanges?
To provide liquidity for stock trades
To create new stocks
To eliminate market competition
To set stock prices
What is a trading post in the context of a stock exchange?
A place to buy goods
The trading location on the floor of a stock exchange
A type of stock
A financial institution
Who oversees the orderly trading of specific stocks at a trading post?
Brokers
Market makers
Investors
Bankers
What role do brokers play on the stock exchange floor?
They create new stocks
They act as agents for buying and selling stocks
They set stock prices
They manage company finances
What is the largest equities marketplace in the world?
NASDAQ Stock Market
London Stock Exchange
New York Stock Exchange (NYSE)
Tokyo Stock Exchange
How many companies are listed on the New York Stock Exchange (NYSE)?
More than 1,500
More than 2,800
More than 3,500
More than 4,000
When was the NYSE American (American Stock Exchange) acquired by NYSE?
2005
2008
2010
2012
What type of stock market is the NASDAQ Stock Market?
Physical trading floor
Electronic stock market
Hybrid stock market
Commodity market
Which stock market is the second largest equities marketplace in the world?
New York Stock Exchange (NYSE)
NASDAQ Stock Market
London Stock Exchange
Shanghai Stock Exchange
What do NASDAQ Stock Market utilize in their operations?
Brokers
Market makers, or dealers
Auctioneers
Traders
How many European exchanges does NASDAQ operate?
5
6
8
10
What does the "52-Week Range" in a stock quote indicate?
The highest and lowest price the stock has traded for in the past 12 months.
The average price of the stock over the past 52 weeks.
The predicted price range for the next 52 weeks.
The price range of the stock in the last 52 days.
What is the "P/E Ratio" in a stock quote?
Current price divided by last four quarters of earnings.
Price divided by earnings per share.
Price divided by estimated future earnings.
Price divided by total dividends paid.
What information does the "Volume of Trading" provide in a stock quote?
Total number of shares traded during the previous day.
Total number of shares available for trading.
Total number of shares traded in the last hour.
Total number of shares traded in the last week.
What is the Dow Jones Industrial Average (DJIA)?
A price average of 30 large, industry-leading firms.
An index tracking 500 large companies.
A technology-firm weighted index.
An index of small-cap stocks.
What does the Standard & Poor’s 500 Index (S&P 500) track?
30 large, industry-leading firms.
500 large companies.
Technology firms on NASDAQ.
Small-cap stocks.
What is unique about the NASDAQ Composite Index?
It tracks 30 large firms.
It uses market capitalization.
It is a technology-firm weighted index.
It tracks only small-cap stocks.
What does the S&P 500 use to measure performance?
Stock prices only.
Market capitalization.
Number of employees.
Revenue.
What does the graph in the image represent?
Stock Market Index Levels since 1980
Global Temperature Changes since 1980
Population Growth since 1980
Technological Advancements since 1980
Which stock market index is represented by the red line in the graph?
Dow Jones Industrial Average
S&P 500 Index
Nasdaq Composite
FTSE 100
Which stock market index is represented by the blue line in the graph?
Dow Jones Industrial Average
S&P 500 Index
Nasdaq Composite
Nikkei 225
Which stock market index is represented by the orange line in the graph?
Dow Jones Industrial Average
S&P 500 Index
Nasdaq Composite
Hang Seng Index
What is the quoted bid in stock trading?
The lowest price a market maker will sell a stock
The highest price a market maker offers to pay for the stock
The average price of a stock over a week
The price at which investors buy a stock
What is the quoted ask in stock trading?
The highest price a market maker offers to pay for the stock
The lowest price at which a market maker will sell a stock
The average price of a stock over a month
The price at which investors sell a stock
What is the spread in stock trading?
The difference between the bid price and the ask price
The average price of a stock over a year
The total number of stocks traded in a day
The commission paid to a stockbroker
What is a market order?
An order executed at a specific price
An order executed immediately at the current market price
An order executed at a future date
An order executed only if the price is favorable
At what price is a market order to buy filled?
At the current bid price
At a future price
At the current ask price
At a negotiated price
What is a limit order?
An order executed immediately at the current market price
An order executed at a specific price
An order executed at a future date
An order executed only if the price is favorable
When is a trade executed with a buy limit order?
If the ask quote is above the price target
If the ask quote is at or below the price target
If the bid quote is above the price target
If the bid quote is at or below the price target
What does stock valuation require finding the present value of?
Future dividends and future selling price
Current stock price and past dividends
Bond interest rates and stock cash flows
Market trends and economic indicators
What is unknown in stock cash flows compared to bonds?
Present value
Interest rates
Price appreciation
Future dividend payment streams
What is required to find the value of a stock today?
The present value of future dividends and the expected future selling price
The future value of past dividends and the current selling price
The present value of past dividends and the expected future buying price
The future value of future dividends and the current buying price
How is today's value of a stock calculated if it is to be held for one year?
Today's value = Present value of next year's dividend and price
Today's value = Future value of last year's dividend and price
Today's value = Present value of last year's dividend and price
Today's value = Future value of next year's dividend and price
What is the purpose of using a longer holding period to estimate stock value?
To increase the stock's future price
To reduce some, but not all, of the uncertainty
To eliminate all risks associated with the stock
To guarantee a higher dividend
In the formula for today's stock value, what does $D_1$ represent?
The initial investment
The dividend at the end of the first year
The future stock price
The interest rate
What does the term $P_0$ represent in the stock valuation formula?
The future stock price
The present value of the stock
The interest rate
The second year's dividend
What does the Dividend Discount Model measure for a holding period of n years?
The future value of dividends
The present value of dividends over n years plus the eventual sale price
The average value of dividends over n years
The total dividends received over n years
In the Dividend Discount Model formula, what does P₀ represent?
The future value of the stock
The average dividend received
The sum of the present value of each payment received
The total dividends over n years
In the formula $ P_0 = \frac{D_1}{1+i} + \frac{D_2}{(1+i)^2} + ... + \frac{D_n + P_n}{(1+i)^n} $, what does $ i $ represent?
The initial investment
The interest rate
The number of years
The dividend amount
What was the dividend paid by McDonald's on November 30, 2020?
$1.29
$1.16
$0.85
$0.94
In which year did McDonald's pay a dividend of $0.50 on February 25?
2010
2009
2008
2007
What was the dividend paid on August 30, 2019?
$1.16
$1.25
$1.01
$0.89
Which of the following dates had a dividend payment of $0.61?
May 27, 2010
February 27, 2017
August 30, 2010
November 29, 2010
What is the Dividend Discount Model based on?
Future dividend income
Past stock prices
Current market trends
Company earnings reports
What is a challenge in applying the Dividend Discount Model?
Requires knowledge of past dividends
Requires estimation of an infinite number of future dividends
Requires a fixed future selling price
Requires current stock market data
In the Dividend Discount Model formula, what does "i" represent?
Initial investment
Interest rate
Inflation rate
Income tax rate
What is the key assumption of the Constant-Growth Model?
The firm has a variable dividend growth rate.
The firm has a constant dividend growth rate.
The firm has no dividend growth.
The firm has a decreasing dividend growth rate.
What is the Constant-Growth Model primarily used for?
Calculating tax rates.
Estimating stock value based on constantly growing dividends.
Determining interest rates.
Evaluating bond prices.
In the Constant-Growth Model formula, what does $P_0$ represent?
The current stock price.
The future stock price.
The dividend growth rate.
The interest rate.
If Coca-Cola’s 2020 dividend was $1.64 and the projected dividends will grow to $1.88 in 2023, what is the implied projected dividend growth rate?
4.66 percent annually
3.91 percent annually
5.05 percent annually
4.44 percent annually
What was the growth rate in dividend changes from 2014 to 2020?
4.66 percent annually
3.91 percent annually
5.05 percent annually
4.44 percent annually
What is a characteristic of preferred stock?
It is a type of short-term debt.
It takes preference over common stock in bankruptcy proceedings.
It does not pay dividends.
It is primarily owned by individual investors.
How is preferred stock valued using the constant-growth model?
P = D * i
P = D + i
P = D / i
P = D - i
Why is preferred stock largely owned by other companies?
Because it is a high-risk investment.
Because dividends are mostly nontaxable income to other corporations.
Because it offers high capital gains.
Because it is easy to sell.
