Stocks And Bonds

Question 1

• are ownership stakes
  -when a company issues stock, it is selling a piece of itself in exchange for cash
  A. Stocks
  B. Bonds

Answer 1

A. stocks

Question 2

Splitting the company into shares and then selling a portion of these shares in the open market in a process of …..
A. Stocks
B. Initial public offering or IPO

Answer 2

B. initial public offering or IPO

Question 3

Also referred to as equity
A. Stocks
B. Bonds

Answer 3

A. Stocks

Question 4

• represent debt
  -when an entity issues a bond it is assuming that debt with the agreement to pay interest for the use of the money.
  A. Stocks
  B. Bonds

Answer 4

B. Bonds

Question 5

If you are approaching retirement age or may need to tap the money on a short-term horizon then a mix with ….. could be the better option for you.
A. Stocks
B. Bonds

Answer 5

B. Bonds

Question 6

Young investors who have a lot of time can benefit in a weak market by buying …….when their prices have dropped.
A. Stocks
B. Bonds

Answer 6

A. Stocks

Question 7

What is a stock?
A) A loan provided to a corporation
B) A debt security issued by a company
C) A financial instrument representing ownership in a company
D) None of the above

Answer 7

Correct Answer: C) A financial instrument representing ownership in a company

Question 8

Which type of stock typically pays dividends?
A) Common stock
B) Preferred stock
C) Blue-chip stock
D) Growth stock

Answer 8

Correct Answer: B) Preferred stock

Question 9

What is the primary purpose of issuing bonds by corporations or governments?
A) To gain ownership in a company
B) To raise capital through borrowing
C) To distribute profits to shareholders
D) None of the above

Answer 9

Correct Answer: B) To raise capital through borrowing

Question 10

Which statement is true about bonds?
A) Bonds represent ownership in a company.
B) Bonds have a fixed interest rate
.C) Bonds never mature.
D) Bonds are riskier than stocks.

Answer 10

Correct Answer: B) Bonds have a fixed interest rate.

Question 11

What happens to the price of a bond when interest rates rise?
A) Bond price rises
B) Bond price falls
C) Bond price remains unchanged
D) It depends on the bond issuer

Answer 11

Correct Answer: B) Bond price falls

Question 12

Which financial instrument represents a loan to a corporation or government?
A) Stock
B) Bond
C) Mutual fund
D) Derivative

Answer 12

Correct Answer: B) Bond

Question 13

What is the term used to describe the annual payment made to bondholders?
A) Dividend
B) Interest
C) Yield
D) Coupon

Answer 13

Correct Answer: D) Coupon

Question 14

Which of the following is considered a risk associated with investing in stocks?
A) Inflation risk
B) Credit risk
C) Market risk
D) Interest rate risk

Answer 14

Correct Answer: C) Market risk

Question 15

What does the term “face value” refer to in relation to a bond?
A) The amount paid for the bond in the secondary market
B) The value of the bond at maturity
C) The interest rate paid by the bond
D) None of the above

Answer 15

Correct Answer: B) The value of the bond at maturity

Question 16

Which type of stock typically has voting rights in a company’s decisions?
A) Common stock
B) Preferred stock
C) Growth stock
D) Blue-chip stock

Answer 16

Correct Answer: A) Common stock

Question 17

What is the key difference between stocks and bonds?
A) Stocks have fixed interest rates, while bonds represent ownership in a company.
B) Stocks have voting rights, while bonds pay periodic interest.
C) Stocks represent ownership, while bonds are a form of borrowing.
D) Stocks have a fixed maturity date, while bonds have variable returns.

Answer 17

Correct Answer: C) Stocks represent ownership, while bonds are a form of borrowing.

Question 18

Which statement is true about the relationship between bond prices and interest rates?
A) Bond prices and interest rates move in opposite directions.
B) Bond prices and interest rates move in the same direction.
C) Bond prices have no relationship with interest rates.
D) Bond prices depend solely on the issuer’s credit rating.

Answer 18

Correct Answer: A) Bond prices and interest rates move in opposite directions

Question 19

What is the term used to describe the percentage return a stock pays out in dividends per year relative to its price?
A) Yield
B) Coupon rate
C) Face value
D) Dividend rate

Answer 19

Correct Answer: A) Yield

Question 20

Which statement is true about preferred stock?
A) It has voting rights in the company.
B) It represents ownership in the company.
C) It typically pays fixed dividends.
D) Its value is not affected by interest rate changes.

Answer 20

Correct Answer: C) It typically pays fixed dividends.

Question 21

What does the term “diversification” refer to in the context of investing in stocks and bonds?
A) Investing in multiple companies to spread risk
B) Investing only in high-risk stocks
C) Investing solely in government bonds
D) None of the above

Answer 21

Correct Answer: A) Investing in multiple companies to spread risk