Stock Trading Stock Trading 2

Question 1

What does 'short selling' a stock mean?

Accepted Answer

Borrowing shares to sell them, hoping to buy back at a lower price

Answer

Short selling involves borrowing shares from a broker, selling them at the current price, then buying them back later at a lower price to profit from the decline.

Question 2

What is a 'stop-loss order'?

Accepted Answer

An order to sell a stock when it falls to a specified price

Answer

A stop-loss order automatically sells a security when its price drops to a predetermined level, limiting the investor's loss.

Question 3

Which of the following best describes 'market capitalization'?

Accepted Answer

The price of one share multiplied by total shares outstanding

Answer

Market capitalization is calculated by multiplying the current share price by the total number of outstanding shares.

Question 4

What is a 'dividend yield'?

Accepted Answer

The percentage of earnings paid as dividends relative to share price

Answer

Dividend yield is calculated by dividing the annual dividend per share by the stock's current price, expressed as a percentage.

Question 5

What does 'P/E ratio' measure?

Accepted Answer

Stock price relative to earnings per share

Answer

The Price-to-Earnings ratio compares a stock's current price to its earnings per share, indicating how much investors pay per dollar of earnings.

Stock Trading Practice Test

Stock Trading Practice Test

Stock Trading Stock Trading 2