Stock Market Quiz
Questions: 16 · 10 minutes
1. A stock pays annual dividends of $2 per share and trades at $40. What is its dividend yield based on those figures?
2%
5%
8%
20%
2. An investor owns only one technology company's stock. Which change would most directly preserve stock exposure while reducing company-specific risk?
Buying more shares of the same company after a price decline
Holding the same stock in two different brokerage accounts
Purchasing the same company's shares on several different dates
Moving part of the holding into a broad stock index fund
3. Company A has a much higher price-to-earnings ratio than similar companies. Which is a reasonable interpretation?
Investors may expect stronger future growth, although that expectation is not guaranteed
Company A is definitely undervalued
Company A must pay a higher dividend than its peers
Company A's share price cannot be volatile
4. An investor buys a stock for $50, later sells it for $54, and receives $2 in dividends while holding it. Before costs and taxes, what was the total dollar return per share?
$2
$4
$6
$8
5. Why can short selling expose an investor to especially large losses?
The maximum loss is always limited to the stock's price at the time of the short sale
The investor automatically loses the full short-sale proceeds when the trade opens
A short position cannot be closed until the company reports earnings
A stock's price can theoretically keep rising, increasing the cost of buying it back
6. If a company is liquidated after bankruptcy, who typically has the most junior claim among these groups?
Secured creditors
Unsecured bondholders
Preferred shareholders
Common shareholders
7. An investor owns 100 shares priced at $60 immediately before a 2-for-1 stock split. Ignoring market movements, what is the expected position immediately after the split?
100 shares at about $30 each
200 shares at about $60 each
50 shares at about $120 each
200 shares at about $30 each
8. An investor contributes the same dollar amount to a fund every month regardless of whether its price has risen or fallen. What strategy is this?
Market timing
Short selling
Dollar-cost averaging
Dividend stripping
9. What does owning a share of common stock generally represent?
A fractional ownership interest in a company
A loan to the company with guaranteed repayment
A contract guaranteeing a fixed annual dividend
A deposit insured against market losses
10. A stock trades near $40, and an investor wants to buy immediately at the best currently available price. Which order most directly matches that goal?
A buy limit order at $35
A market order
A sell stop order at $40
A buy stop order at $45
11. A buyer wants a stock but refuses to pay more than $50 per share. Which order most directly expresses that condition?
A market buy order
A buy stop order at $50
A buy limit order at $50
A sell limit order at $50
12. A company has 50 million shares outstanding, and each share trades at $20. What is its approximate market capitalization?
$1 billion
$70 million
$2.5 billion
$20 billion
13. In a stock quote, what do the bid and ask usually represent?
The bid is yesterday's closing price, while the ask is today's opening price
The bid is the highest current buying offer, while the ask is the lowest current selling offer
The bid is the exchange's estimated value, while the ask is the company's estimated value
The bid is the lowest selling offer, while the ask is the highest buying offer
14. What is the primary objective of a broad stock index fund?
To guarantee a positive return every calendar year
To track the performance of a specified market index before fees and tracking differences
To select only stocks expected to outperform soon
To keep its share price fixed regardless of market conditions
15. Which comparison between a typical stock and a typical corporate bond is most accurate?
Both represent ownership and normally carry voting rights
A bond represents ownership, while a stock represents a loan
A stock represents ownership, while a bond represents lending to the issuer
Both guarantee repayment of the original purchase price at maturity
16. An investment of $1,000 gains 10% in the first year and 10% in the second year, with no fees or withdrawals. What is it worth after two years?
$1,210
$1,200
$1,201
$1,100