Investment Jobs Equity Markets and Stock Analysis Test 2

Question 1

Which technical analysis indicator is used to identify overbought or oversold conditions on a scale of 0 to 100?

Accepted Answer

Relative Strength Index (RSI)

Answer

The RSI is a momentum oscillator ranging from 0–100; readings above 70 typically signal overbought conditions while readings below 30 signal oversold conditions.

Question 2

In fundamental analysis, what does the Debt-to-Equity (D/E) ratio measure?

Accepted Answer

The proportion of financing from creditors versus shareholders

Answer

The D/E ratio compares total liabilities to shareholder equity, indicating how much debt a company uses relative to equity to finance its operations and assets.

Question 3

What is 'short selling' in equity markets?

Accepted Answer

Selling borrowed shares hoping to repurchase at a lower price

Answer

Short selling involves borrowing shares, selling them at the current price, and aiming to buy them back later at a lower price to profit from a price decline.

Question 4

Which of the following best describes a 'blue-chip' stock?

Accepted Answer

A share of a large, well-established, financially stable company

Answer

Blue-chip stocks are shares of large, reputable, and financially sound companies with a long history of reliable performance, often included in major indexes like the Dow Jones.

Question 5

What is the purpose of a stock split?

Accepted Answer

To reduce the share price by increasing the number of shares outstanding

Answer

A stock split increases the number of shares while proportionally reducing the price per share, making the stock more accessible to investors without changing the company's total market cap.

Investment Practice Test

Investment Practice Test

Investment Jobs Equity Markets and Stock Analysis Test 2