Chapter 8 Terms

Question 1

the most prevalent type of stock that companies offer and represents true ownership of the firm

Answer 1

Common stock

Question 2

a distribution of a portion of the corporation’s profits

Answer 2

Dividends

Question 3

type of stock in which shareholders receive their dividends before the common shareholders

Answer 3

Preferred stock

Question 4

a person who generally works for a brokerage company and who specializes in buying and selling stocks on behalf of his clients

Answer 4

Stockbroker

Question 5

the fee stockbrokers work for

Answer 5

Commission

Question 6

physically present on the trading floor to execute requested trades (aka stock traders)

Answer 6

Floor traders

Question 7

what the market indicates the transaction on

Answer 7

Tape

Question 8

what the investment bank then schedules the sale of a certain quantity of stock through the exchange in

Answer 8

Initial public offering (IPO)

Question 9

where merchants originally traded stocks

Answer 9

Stock exchanges

Question 10

the most well- known and reputable stock market in the world

Answer 10

New York Stock Exchange (NYSE)

Question 11

has become a well-established stock exchange even though it is less than forty years old

Answer 11

NASDAQ

Question 12

lesser known but still reputable American market

Answer 12

American Stock Exchange (Amex)

Question 13

a group of stocks that analysts use for the purpose of analyzing stock trends

Answer 13

Stock index

Question 14

the most well- known index

Answer 14

Dow Jones Industrial Average (DJIA)

Question 15

a commonly reported investment index

Answer 15

Standard and Poor’s 500 (S&P 500)

Question 16

privately managed stock portfolios

Answer 16

Mutual funds

Question 17

a collection of stocks from different individual corporations

Answer 17

Stock portfolio

Question 18

when people actively buy and sell stocks for the purpose of taking advantage of short-term price changes

Answer 18

Speculation

Question 19

stock prices rise in an industry or across the entire market simply because of expectations and they rise in excess of the corporations’ true value

Answer 19

Speculative bubble

Question 20

founded in 1934 to ensure that corporations provide accurate and current information to the public about their financial situations and their business dealings

Answer 20

Securities and Exchange Commission (SEC)

Question 21

shares, or a portion, of a corporation

Answer 21

Stock