#1
Which of the following is a common reason for investing in stocks?
Potential for capital appreciation
ExplanationStocks offer the potential for value increase over time.
#2
What does IPO stand for in the context of stock markets?
Initial Public Offering
ExplanationIt's the first sale of stock by a company to the public.
#3
What is the primary function of a stockbroker?
To facilitate buying and selling of securities on stock exchanges
ExplanationThey execute trades on behalf of clients in financial markets.
#4
What does the term 'market capitalization' refer to in the context of stocks?
The total value of all outstanding shares of a company
ExplanationIt reflects the size of a company in the stock market.
#5
Which of the following is a measure of a company's profitability?
Earnings per share (EPS)
ExplanationIt shows how much profit a company generates for each outstanding share.
#6
Which of the following is NOT a type of stock brokerage?
Fixed-rate brokerage
ExplanationThere's no common 'fixed-rate brokerage' model in the stock brokerage industry.
#7
What is the role of a stock exchange in the stock market?
To facilitate buying and selling of securities
ExplanationIt provides a platform for trading securities.
#8
What is the significance of the P/E ratio in stock analysis?
It measures the profitability of a company relative to its stock price.
ExplanationIt indicates how much investors are willing to pay for each dollar of earnings.
#9
What does the term 'blue chip stocks' refer to?
Stocks of well-established, financially stable companies
ExplanationThey are shares of large, stable, and financially sound companies.
#10
In the context of stock trading, what is a 'limit order'?
An order to execute a trade at a specific price or better
ExplanationIt sets a specific price for buying or selling a stock.
#11
What does the term 'dividend yield' indicate to investors?
The ratio of dividends to the current stock price
ExplanationIt shows the percentage return on investment from dividends.
#12
Which of the following is a fundamental analysis technique for evaluating stocks?
Price-earning growth ratio (PEG)
ExplanationIt helps identify stocks potentially undervalued relative to their growth prospects.
#13
Which of the following factors does NOT typically influence stock prices?
Weather conditions
ExplanationWeather conditions generally do not directly affect stock prices.
#14
What is the primary advantage of a buy-and-hold investment strategy in stocks?
It minimizes transaction costs associated with frequent trading.
ExplanationIt reduces costs and allows investors to benefit from long-term market trends.
#15
What does the term 'margin trading' mean?
Trading stocks with borrowed funds, using securities held as collateral
ExplanationIt allows investors to buy more stocks than they could with their own funds, leveraging their positions.