Stock Advisor For Beginners 3 — Questions and Answers
Question 1: What is a stock exchange?
- A marketplace where shares are bought and sold (Correct answer)
- A bank that stores cash
- A government tax office
- A company's headquarters
Correct answer: A marketplace where shares are bought and sold
Exchanges like the NYSE and Nasdaq facilitate trading of stocks.
Question 2: What is the 'bid price' in a stock quote?
- The highest price a buyer is willing to pay (Correct answer)
- The price the company set at IPO
- The lowest price ever recorded
- The dividend amount
Correct answer: The highest price a buyer is willing to pay
The bid is what buyers currently offer for a share.
Question 3: What is a market order?
- An order to buy or sell immediately at the best available price (Correct answer)
- An order to wait one year
- An order to cancel all trades
- An order that only fills at a set price
Correct answer: An order to buy or sell immediately at the best available price
Market orders execute right away at the current market price.
Question 4: What does a limit order let you do?
- Set a specific price at which to buy or sell (Correct answer)
- Buy unlimited shares for free
- Avoid all market risk
- Guarantee a profit
Correct answer: Set a specific price at which to buy or sell
A limit order only executes at your chosen price or better.
Question 5: What is a 'bear market'?
- A prolonged period of falling prices (Correct answer)
- A market with rising prices
- A holiday closure
- A market for bonds only
Correct answer: A prolonged period of falling prices
A bear market is marked by declining prices and pessimism.
Question 6: What is market capitalization?
- Share price multiplied by total shares outstanding (Correct answer)
- The total dividends paid
- The company's annual revenue
- The price of one share
Correct answer: Share price multiplied by total shares outstanding
Market cap measures a company's total equity value.
Question 7: Why is a long-term mindset often recommended for beginners?
- It reduces the impact of short-term volatility (Correct answer)
- It guarantees daily profits
- It avoids paying any taxes
- It eliminates all risk
Correct answer: It reduces the impact of short-term volatility
Holding longer smooths out short-term swings and benefits from compounding.
Stock Advisor For Beginners 3
What is a stock exchange?