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Personal Finance: Investing in Stocks
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Avg score: 35% • Most missed: “Proctor and Gamble is an example of a blue-chip stock.”

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. Dividends are paid regardless if the company makes a profit.
2. What are proxy fights?
3. Which of the following investment options is not affected by a change in the market rates of interest?
4. When the economy slumps, the earnings of cyclical stocks drop; when the economy recovers, so do their earnings.
5. You are looking at the stock quotes in your newspaper and you see that your stock closed up 5% yesterday- Where would you look to see how it has been doing over the last year?
6. Most of the stocks listed in the Dow Jones Industrials have high P/E ratios and are classified as speculative stocks.
7. The dividend yield on a share of common stock is
8. The ________ is a common stock indicator, consisting of 30 large industrial firms, and is used to indicate how well stocks have done.
9. Your investment goal is to receive a stream of income from your investment- Which of the following would be important information to determine whether a particular stock purchase would suit your plan?
10. A proxy is a legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.
11. A ________ is a measure of the performance of a group of stocks that represent the market or a sector of the market.
12. Because the Dow Jones Index Average is based on the movement of 500 large, well-established stocks, many investors believe it reflects price movements for large firms rather than for the general market.
13. Stocks reduce risk by portfolio rebalancing.
14. For investors with a long time in front of them, market volatility is not of great concern today.
15. As compared to growth stocks, income stocks pay ________ dividends with ________ growth in earnings.
16. A SWOT analysis
17. The stocks tracked by the Dow represent over 50% of the market value of the NYSE.
18. The DJIA weights stocks based on
19. Suppose that a company feels that the price of its stock is more than the average small investor can afford- To lower the price the company could engage in a
20. You are considering purchasing one of two stocks- Stock A is expected to pay a $2.50 dividend, and has historically grown at 6%- Stock B is expected to pay a $3.00 dividend and has historically grown at 4%- Both are the same risk, and you desire to earn a 16% return- Which of the following is true?
21. Which of the following statements is most correct regarding the general relationship between stocks and interest rates?
22. When investors talk about movements in the market, they generally refer to the Russell 1000.
23. Both capital gains and dividends are guaranteed with common stock.
24. Your friend has recommended that you purchase stock in company XYZ- It is expected to pay a $4 dividend, and has historically grown at 5%- If the required rate of return is 12%, what is the estimated value of a share of XYZ stock?
25. You are considering the purchase of a stock with a current market price of $50.25 per share- It is expected to pay a dividend of $5.25 next year- Historically the stock has grown at 5%, and based on its risk, you desire to earn a 15% return- Which of the following is true?

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