Stock and Bond

Question 1

What is a stock?

Answer 1

A stock represents a share in the ownership of a company.

Question 2

What is a bond?

Answer 2

A bond is a fixed income instrument that represents a loan made by an investor to a borrower.

Question 3

True or False: Stocks typically provide fixed returns.

Answer 3

False

Question 4

What is the primary purpose of issuing stocks?

Answer 4

To raise capital for the company.

Question 5

What is the difference between common stock and preferred stock?

Answer 5

Common stock usually comes with voting rights and variable dividends, while preferred stock typically has fixed dividends and no voting rights.

Question 6

Fill in the blank: Bonds are often considered _____ investments compared to stocks.

Answer 6

safer

Question 7

What is the term for the interest rate that a bond issuer pays to bondholders?

Answer 7

Coupon rate

Question 8

True or False: Stocks are generally considered less volatile than bonds.

Answer 8

False

Question 9

What does it mean when a bond is called?

Answer 9

It means the issuer has decided to pay back the bond before its maturity date.

Question 10

What is market capitalization?

Answer 10

The total market value of a company’s outstanding shares of stock.

Question 11

What is a dividend?

Answer 11

A dividend is a portion of a company’s earnings distributed to shareholders.

Question 12

What is the primary risk associated with investing in stocks?

Answer 12

Market risk or the risk of losing value due to market fluctuations.

Question 13

What does ‘issuer’ refer to in the context of bonds?

Answer 13

The entity that issues the bond and is responsible for paying back the principal and interest.

Question 14

Fill in the blank: A _____ bond is issued by a corporation.

Answer 14

corporate

Question 15

What is the yield of a bond?

Answer 15

The income return on an investment, expressed as a percentage of the investment’s cost.

Question 16

True or False: Bonds are typically riskier than stocks.

Answer 16

False

Question 17

What is a stock market index?

Answer 17

A statistical measure that represents the value of a section of the stock market.

Question 18

What does it mean for a stock to be ‘overvalued’?

Answer 18

It means the stock’s price is higher than its intrinsic value.

Question 19

What is a mutual fund?

Answer 19

An investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks and/or bonds.

Question 20

What is an initial public offering (IPO)?

Answer 20

The process through which a private company offers shares to the public for the first time.

Question 21

Fill in the blank: A _____ is a bond that is issued by the government.

Answer 21

government bond

Question 22

What is the significance of a bond’s maturity date?

Answer 22

It is the date when the bond’s principal amount is repaid to the bondholder.

Question 23

What is a stock split?

Answer 23

A corporate action in which a company divides its existing shares into multiple new shares to boost liquidity.

Question 24

True or False: The price of a bond generally increases when interest rates rise.

Answer 24

False

Question 25

What is a bear market?

Answer 25

A market condition in which prices are falling or are expected to fall.

Question 26

What does ‘liquidity’ refer to in the context of stocks and bonds?

Answer 26

The ease with which an asset can be converted into cash without affecting its market price.