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Personal Finance: Investing in Stocks
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What is a a stock?

A stock represents an ownership stake in a company as a common shareholder.

Common stocks allow shareholders to vote on company issues, with most companies granting one vote per share.

Some companies also offer stockholders dividend payouts, giving investors a stream of income on top of the market value of the stock.
 

Personal Finance: Investing in Stocks
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25 Questions

1. Louise Rogers knows that several factors affect the price of a share of common stock- The one that says there is an inverse relationship between interest rates and the value of a share of common stock is the ________ factor.
2. Dividends are paid regardless if the company makes a profit.
3. Nathan noticed that a company that has great potential just declared a ________ because its stock price was getting too high for the small investor to buy the stock- The company will substitute more shares for the existing shares of stock without increasing the market value of the firm.
4. Holding several types of stock can greatly reduce the risk in your portfolio.
5. Stocks reduce risk by portfolio rebalancing.
6. The net income of the firm is $4 million dollars- The firm will pay $500,000 in dividends to the preferred shareholders- There are currently 1 million shares of common stock outstanding- What are the earnings per share for this firm?
7. The ________ the firm's earnings growth rate, the ________ the firm's P/E ratio and the ________ the investor's required rate of return, the ________ the P/E ratio.
8. The Dow Jones Industrial Average has been an index since what year?
9. Greg Jewell read about several companies that were performing relatively well despite the current recession- Stocks like these, that in some cases actually perform better during downturns in the economy, are called ________ stocks.
10. Using the stock valuation formula calculate the value of a share of stock if it is expected to pay $5 in dividends, in addition the dividends are expected to grow at a rate of 4 percent forever, and the investor's required rate of return is 12 percent.
11. Some firms have negative earnings per share numbers.
12. The acronym DRIP stands for
13. Microsoft is an example of a company whose common stock is considered to be a growth stock.
14. Speculative stocks are often traded through the OTC Bulletin Board.
15. A growth stock is known for its high dividend yields.
16. Common stockholders are entitled to elect the company's board of directors- Usually one share of stock is equal to ________ vote(s).
17. The ________ is a common stock indicator, consisting of 30 large industrial firms, and is used to indicate how well stocks have done.
18. For investors with a long time in front of them, market volatility is not of great concern today.
19. If you were to purchase common stocks issued by large, nationally known companies with sound financial histories with solid dividend and growth records you would own what are called
20. While you can't be assured of what you will get when you sell your stock, you will most likely not have difficulty selling it.
21. You have just purchased 10 shares of a stock selling at $50 per share- Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding- Which of the following statements is most correct?
22. Which of the following statements is most correct regarding the general relationship between stocks and interest rates?
23. Your father-in-law's stockbroker examines future earnings and dividends, the expected level of interest rates, and the firm's risk to provide a basis for buy-sell recommendations- This stockbroker uses the ________ approach to stock valuation.
24. A stock split is a tactic by a corporation to manipulate the market price of its stock.
25. Jessica wanted to gauge stock performance in general- She found a useful tool that measured the stock prices of 30 large industrial firms, called the

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