L5: Stock Market

Question 1

What are the main types of stock?

Answer 1

Penny stocks, growth stocks and blue chip stocks

Question 2

What is the aim of short selling?

Answer 2

To borrow shares, sell them, then buy them back some time later when they are worth less than we sold them for

Question 3

What is buying on margin? Why is it risky?

Answer 3

Borrowing money to invest in stock - risky because losses are also amplified

Question 4

Why is disclosure a disadvantage?

Answer 4

Useful information for competitors

Question 5

What do underwriters do?

Answer 5

Buy shares and sell them on

Question 6

What are securities?

Answer 6

Broad term to describe financial assets

Question 7

What are the types of mutual funds?

Answer 7

Open, closed end, index linked

Question 8

How do hedge funds differ from mutual funds?

Answer 8

Open to limited no. investors with substantial funds, unregulated (less protection about behaviour of managers)

Question 9

What are the four types of investment fund/vehicle?

Answer 9

• Mutual funds
• Hedge funds
• Private equity
• Exchange traded funds