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WorksheetsFinance Section 2 Test
Total questions: 43
Worksheet time: 22mins
1. A stock represents:
A loan to a company
Ownership in a company
A bond issued by a government
A guaranteed return
Equity financing means a company:
Raises money by selling ownership shares
Takes out a bank loan
Issues government bonds
Sells products
Which is a key benefit of owning stock?
Guaranteed repayment
Potential dividends and appreciation
Fixed interest payments
Risk-free growth
When a stock increases in value, this is called:
Dividend yield
Price appreciation
Equity financing
Short selling
A dividend is:
The stock’s selling price
A loan repayment
A company's profits given to investors
A payment given to bondholders
Common stockholders generally have:
No voting rights
Voting rights
Guaranteed dividends
Higher claim in bankruptcy
Preferred stockholders usually:
Receive dividends before common stockholders
Vote on management decisions
Have no claim on assets
Trade only on NASDAQ
Which is riskier but offers higher potential returns?
Bonds
Preferred stock
Common stock
Treasury bills
Which investor would prefer preferred stock?
One seeking steady dividend income
One seeking voting rights
One seeking capital appreciation only
One avoiding dividends
In liquidation, preferred shareholders:
Are paid before common shareholders
Are paid last
Have the same claim as common
Have voting rights
The NYSE is best described as:
A virtual network only
A physical exchange with an auction market
A cryptocurrency platform
A bond-only exchange
NASDAQ is:
A physical floor exchange
An electronic dealer’s market
Limited to commodities
Government-run
Which type of company is most common on NASDAQ?
Oil companies
Technology companies
Utilities
Government contractors
The price of a stock is primarily driven by:
Central bank policy
Supply and demand
Bond yields
Dividend mandates
Market capitalization is calculated as:
Assets ÷ Liabilities
Share price × Shares outstanding
Dividend ÷ Share price
Profit ÷ Equity
Earnings per share (EPS) is:
Assets ÷ Shares
Net income ÷ Shares outstanding
Price ÷ Earnings
Dividends + Assets
21. Short selling means:
Selling securities that are not owned by the seller, with the intention of buying them back later at a lower price.
Selling securities at a higher price than their purchase price.
Buying securities with the intention of holding them for a long period.
Purchasing securities on margin.
A risk of short selling is:
Limited losses
Unlimited potential losses
Guaranteed profits
No risk
A margin account allows investors to:
Buy only cash securities
Borrow money from a broker to buy stock
Avoid interest charges
Trade bonds only
A margin call occurs when:
Broker gives a dividend
Account equity falls below required level
Stock splits occur
A short position begins to lose money
Which is riskier:
Cash account trading
Margin account trading
Bond investing
Dollar-cost averaging
A market order means:
Buy only at lower price
Sell only at higher price
Buy or sell immediately at best price
Wait until dividend declared
A limit order specifies:
No restrictions
A maximum buy price or minimum sell price
Immediate execution
Broker’s choice
A stop order becomes a market order when:
Dividend is paid
Price reaches the stop level
Stock splits
Broker decides
Which order type ensures execution but not price?
Limit order
Market order
Stop-limit
None
Dollar-cost averaging means:
Investing equal amounts at regular intervals
Buying only at high prices
Buy only at lower price
Wait until dividend declared
Diversification reduces:
Profit
Risk
Growth
Dividends
Growth stocks are purchased for:
High potential price appreciation
Dividend yield only
Stability only
Bond-like income
A reverse stock split increases:
Number of shares
Share Price
Dividends
risk
A company announces a 2-for-1 split. If you owned 100 shares at $50 each, you now own:
50 shares at $100
200 shares at $25
200 shares at $100
50 shares at $25
Which corporate action directly provides cash to shareholders?
Stock split
Reverse split
Dividend
P/E ratio
Stock repurchases (buybacks) tend to:
Increase earnings per share
Dilute shareholder value
Lower stock demand
Reduce dividends automatically
Systematic risk refers to:
Market-wide risk that cannot be diversified away
Company-specific risk
Elimination of risk
Only bond risk
Unsystematic risk is:
Company or industry-specific risk
Market-wide
Interest rate risk
Always positive
The risk-return tradeoff states:
Higher risk is associated with higher potential returns
Risk guarantees returns
Low risk gives high return
Risk is avoidable
An IPO is:
Initial Public Offering
Internal Private Offering
Investment Portfolio Order
Index Price Option
The main purpose of financial markets is to:
Facilitate raising capital
Print money
Pay dividends
Provide tax refunds
The act of issuing more shares and reducing the ownership percentage of existing shareholders is called:
stock split
reverse stock split
buyback
dilution
You have 500 shares of xyz when they announce a $2.00 dividend. You have a DRIP plan set up. How many shares do you have at the start of Q2 if the stock price on the payout date is $20
500
50
550
502
Assume a 25% maintenance requirement, and a $1,000 cash balance in your account. You short a 100 shares of a stock @ $30. At what price would you receive a margin call?
33.01
35.01
40.01
45.01
Which is not a risk to specific to short selling
Generally, the market moves up
Price may go to zero
short squeezes
you not only have to be right, but be right at the right time
You buy 500 shares of XYZ @ 39.43. One month later, you sell 300 of the 500 shares @ 36.20. What is your realized gain / loss
$1,615 gain
$969 gain
$1,615 loss
$969 loss
All publicly traded companies must report their earnings every
1 month
3 months
4 months
6 months
