The Stock Market

Question 1

Law of Demand

Answer 1

As price increases demand decreases
As price decreases demand increases

Question 2

Law of Supply

Answer 2

As price increases supply increases
As price decreases supply decreases

Question 3

In the stock market, price is constantly adjusting to?

Answer 3

Achieve equilibrium

Question 4

What is the greatest influence on price

Answer 4

Scarcity

Question 5

What is the stock market?

Answer 5

A place to buy and sell shares (partial ownership) in companies

Question 6

What is a secondary market established on?

Answer 6

On supply and demand

Question 7

Who’s performance is viewed as a barometer of the economic health of the U.S.

Answer 7

The stock market

Question 8

What is liquidity?

Answer 8

Ability to convert capital into cash

Question 9

What is a sole proprietorship?

Answer 9

all profits/all risks
complete authority

Question 10

What is a partnership?

Answer 10

Limits liability/share responsibility
Potential to raise more capital

Question 11

What is a private corporation?

Answer 11

Business exists as legal entity

Question 12

What is a public corporation

Answer 12

Shares sold on stock markets

Question 13

What methods corporation use for raising capital?

Answer 13

Retained earnings
Bank Loans
Bonds
Stocks

Question 14

What is a retained earning?

Answer 14

Reinvest profit -> slow process

Question 15

What is a bank loan?

Answer 15

Borrow money, pay back with interest -> difficult to get large loans

Question 16

What is a bond?

Answer 16

Money loaned from individuals to corporation/government

Question 17

What is a stock?

Answer 17

Shares - ownership of a pert of (a share in) a corporation

Question 18

What is the general investment rule?

Answer 18

The greater the risk, the greater the potential return

Question 19

What is extremely liquid?

Answer 19

Savings Account

Question 20

What are Government bonds?

Answer 20

Federal - U.S. Savings Bonds
State
Municipal - “muni’s”

Question 21

What are Corporate bonds?

Answer 21

Most are Debenture Bonds
Most common form -> unsecured bonds

Mortgage Bonds
-Backed by asset(s) of corporation
Junk Bonds
-High risk/high yield

Question 22

What are preferred stocks?

Answer 22

Pays regular dividend

Question 23

What are common stocks?

Answer 23

May or may not pay dividend

Question 24

What is a blue chip?

Answer 24

It’s a high quality, low risk common stock

Question 25

52 week high/low?

Answer 25

Highest and lowest price paid for a stock during the past year

Question 26

What is a Div. (dividend)?

Answer 26

Amount of last dividend paid on that stock

Question 27

What is speculation?

Answer 27

Trying to make a large amount of money in a short period of time using high risk stocks.

Question 28

Types of Speculation

Answer 28

Buying long
Selling short

Question 29

What is buying long?

Answer 29

Buying stock immediately and selling later at a profit

Question 30

What is buying on margin?

Answer 30

buying stocks with borrowed money

Question 31

What is selling short?

Answer 31

Sell borrowed stock at a high price
buy it back later at a lower price
return stock to lender
keep profit

Question 32

Factors that drive a stock price?

Answer 32

Trust in a company
A company’s financial health - annual reports
An industry’s health
Natural disasters, war, foreign policy, pandemics etc.
Economic trends (inflation, unemployment)