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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. Which of the following makes common stocks more risky than corporate bonds when both are issued by the same company?
2. The dividend yield is calculated by dividing the earnings per share by the market price of the stock.
3. When a company buys back its own common stock it is engaging in a
4. Dividends
5. A firm may decide that the price per share for its stock is getting too high for the smaller investor so the company 'splits the stock.'
6. The DJIA weights stocks based on
7. If your portfolio is very diversified then the beta is of no use to you.
8. A stock currently sells for $100 per share, and has earnings of $2.00 per share- What is the stock's P/E ratio?
9. What are proxy fights?
10. Microsoft is an example of a company whose common stock is considered to be a growth stock.
11. When the economy slumps, the earnings of cyclical stocks drop; when the economy recovers, so do their earnings.
12. The term 'bear' stems from the fact that bears raise their paws upward when they attack.
13. A stock market characterized by ________ prices is termed a bear market.
14. According to your text, there is very little validation in using technical analysis as an investing tool.
15. In the event of a corporate bankruptcy, bondholder's claims are paid before shareholders' claims are paid.
16. 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?
17. Which feature of common stock ownership allows a stockholder to share in the company's earnings after the creditors are paid?
18. The price/earnings ratio is an indication of how much investors are willing to pay for a dollar of the company's earnings.
19. The Dow Jones Industrial Average is based on the movement of 500 stocks, primarily from the NYSE.
20. Deborah recently purchased a stock that is considerably more risky than a typical stock- It has exhibited a high degree of earnings variability- This is an example of a(n) ________ stock.
21. Large-caps, mid-caps, and small-caps refer to the size of the firm issuing the stock, more specifically, to its
22. If you are very optimistic about the ability of firms to earn profits today and in the immediate future, what type of investor philosophy do you exhibit?
23. 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?
24. You purchased 100 shares of Quantex at $150 per share for a total investment of $15,000- After your purchase the stock had a 3 for 1 split- How many shares do you now own and how much is your original investment now worth?
25. As a shareholder in Titanic Shipping, Inc., James Blue is one of the many actual owners- In case of the bankruptcy of the corporation, his liability would be limited to

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