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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. The price/earnings ratio is an indication of how much investors are willing to pay for a dollar of the company's earnings.
2. The S&P 500 is a much broader index than the Dow.
3. 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
4. Dividends are paid regardless if the company makes a profit.
5. Technical analysis is a stock valuation technique that incorporates expected future earnings of the company, the riskiness of the companies cash flows, and interest rates in the markets in determining the current value of the stock.
6. Defensive stocks frequently perform better during economic downturns.
7. Growth stocks are issued by companies that have exhibited sales and earnings growth well above their industry average.
8. Using the stock valuation formula calculate the value of a share of stock if it is expected to pay $15 in dividends, in addition the dividends are expected to grow at a rate of 8 percent forever, and the investor's required rate of return is 10 percent.
9. When all stocks move in the same direction, diversification among stocks works just as well as ever.
10. Which of the following makes common stocks more risky than corporate bonds when both are issued by the same company?
11. The term 'bear' stems from the fact that bears raise their paws upward when they attack.
12. The firm will pay an annual dividend this year of $2 per share- The current market price of the stock is $40.00 per share- The book value of this stock is $24.00 per share- The earnings per share for this firm is $5.75- What is the current dividend yield of this stock?
13. 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.
14. Stocks reduce risk by portfolio rebalancing.
15. A stock market characterized by ________ prices is termed a bear market.
16. Berkshire Hathaway's 'A' stock has never split- As a result, in mid-2014 one share of its stock was selling at a price of more than ________ per share.
17. All of the following are stock market indexes except
18. Which feature of common stock ownership allows a stockholder to share in the company's earnings after the creditors are paid?
19. As compared to growth stocks, income stocks pay ________ dividends with ________ growth in earnings.
20. Abby previously owned 200 shares of NEWAGE stock at $25 per share- Today the company split the stock in a 3:1 split- Now what is the value of Abby's stock?
21. Technical analysis focuses on supply and demand, using charts and computer programs to project stock trends.
22. What point marks the purchase of common stock without a right to a declared dividend?
23. The DJIA weights stocks based on
24. The phrase ________ is sadly appropriate for the actions of some people, as they perceive that investment success rests in making frequent transactions.
25. 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

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