Stock Marketing Practices

Question 1

What does compounding refer to in relation to investing?

Accepted Answer

The potential for an investment's returns to grow as they are reinvested

Answer

The reinvestment of earnings from a company back into the company

Answer

When an investor buys and sells the same security within a short period of time

Answer

The fees charged by stockbrokers when an investor buys or sells shares

Question 2

The stock market is a way for investors to ______

Accepted Answer

Trade stocks for cash, or vice versa.

Answer

Gamble on stocks

Question 3

How does the stock market allow investors to wager on the future of a company?

Accepted Answer

Setting the company's value based on the price at which investors are willing to buy and sell.

Answer

By gambling on the company's stock price.

Answer

By investing in the company's stock.

Answer

By judging the company on its business results and future prospects.

Question 4

As long as you don’t sell your stock, you _____.

Accepted Answer

There will be no taxation on the gains.

Answer

Will owe tax on the gains

Answer

Will only have to pay taxes on dividends

Answer

Can hold your stock forever

Question 5

Which of the following is NOT a buying strategy that reduces your exposure to price volatility?

Accepted Answer

Investing a predetermined sum of money at recurring times

Answer

Investing a lump sum all at once

Answer

Investing only when the stock price is low

Answer

Dollar-cost averaging

Question 6

What is the best advice for avoiding the morale-crushing experience of bumpy results right out of the gate when investing?

Accepted Answer

Divide the amount you wish to invest by three, and then buy shares at three different locations.

Answer

Do not invest in companies that are experiencing events.

Answer

Invest in thirds only when the market is down.

Answer

Invest all of the amount you want to invest at once.

Question 7

What does it mean to "buy the basket"?

Accepted Answer

Purchasing a basket of stocks entails purchasing all of the companies in a specific industry.

Answer

Buying a basket of stocks means buying all the stocks in the world.

Answer

Buying a basket of stocks means buying all the stocks in a particular company.

Answer

Buying a basket of stocks means buying all the stocks in a particular country.