Personal Finance Stock Market

The calculation to determine your Capital Gain.

Answer: (Current Price of a Share Minus Your Purchase Price of a Share) Times (the Number of Shares Owned)

The calculation to determine Current Yield (a percentage).

Answer: (The Annual Dividend Amount) Divided by (the Current Market Price of the Stock)

The calculation to determine Earnings Per Share.

Answer: (The Company's Net Earnings) Divided by (the Number of Shares Outstanding)

The calculation to determine the Price Earnings Multiple.

Answer: (The Current Market Price) Divided by (Earnings Per Share)

The calculation to determine Total Return.

Answer: (The Current Return from Dividends) plus (the Capital Gain)

A market where investors are pessimistic about the economy and are experiencing or anticipating a weakening in stock values.

Answer: A Bear Market

A stock that is usually considered a safer investment because the company is often a large industry leader, with a history of stable earnings, and usually consistent payment of dividends.

Answer: A Blue-chip Stock

A market where investors are optimistic about the economy and the potential for stock growth.

Answer: A Bull Market

A fee charged by a brokerage firm or investment bank to buy or sell securities for an investor.

Answer: A Commission

A stock whose market value tends to follow or reflect the ups and downs of the economy.

Answer: A Cyclical Stock

This type of order will be cancelled if it is NOT executed on the day it is placed.

Answer: A Day Order

A stock whose market value tends to remain more stable than the overall market during downturns in the economy.

Answer: A Defensive Stock

A brokerage firm that essentially executes trades at a low price and does NOT provide extensive customer support.

Answer: A Discount Broker

A brokerage firm that provides extensive customer support such as investment research often at a higher fee.

Answer: A Full-service Broker

This type of order is open until it is executed or cancelled by the investor.

Answer: A Good 'Til Cancelled (GTC) Order

A stock issued by a company having higher-than-average earnings growth and therefore higher potential capital appreciation.

Answer: A Growth Stock

A stock whose market capitalization is greater than $5 Billion.

Answer: A Large Cap Stock

An order to buy or sell a stock at the current market price.

Answer: A Market Order

A stock whose market capitalization is between $1.5 Billion to $5 Billion.

Answer: A Mid Cap Stock

A stock whose market price typically sells for less than $1.00 (or arguably $5.00) per share.

Answer: A Penny Stock

All securities held by an investor.

Answer: A Portfolio

A market in which an investor buys a company's securities from the company itself through an investment bank.

Answer: A Primary Market

A company whose shares are owned by a relatively small group of people and are NOT traded openly in the stock market.

Answer: A Private Corporation

A company whose shares are traded openly in the stock market and where anyone can purchase them.

Answer: A Public Corporation

A purchase of 100 shares (or multiples of 100 shares) of a stock.

Answer: A Round Lot

A market in which an investor buys a company's securities from other investors through an investment bank.

Answer: A Secondary Market

A marketplace where brokers who represent investors meet to buy and sell securities.

Answer: A Securities Exchange

A stock whose market capitalization is less than $1.5 Billion.

Answer: A Small Cap Stock

A process in which the shares of stock owned by existing shareholders are proportionately increased while the market value of the shares are proportionately decreased.

Answer: A Stock Split

An individual who is licensed to buy or sell securities for clients.

Answer: An Account Executive or Stock Broker

A stock that generally pays higher-than-average dividends.

Answer: An Income Stock

When a company sells its stock to the general public for the first time.

Answer: An Initial Public Offering or IPO

A purchase of other than 100 shares (or NOT a multiple of 100 shares) of a stock.

Answer: An Odd Lot

A long-term strategy of purchasing and keeping the stock for several years.

Answer: Buy-and Hold

A short-term strategy of creating leverage by borrowing part of the money needed to purchase a stock from your brokerage firm.

Answer: Buying Stock on Margin

An illegal practice of disreputable brokers who encourage investors to do excessive stock buying and selling stocks to generate more commissions.

Answer: Churning

The calculation to determine Market Capitalization.

Answer: Current Stock Price times the Number of Shares Outstanding

A strategy of investing in a broad range and number of companies in order to limit the potential investment risk.

Answer: Diversification

True or false: A company has to pay its stockholders something in the event of a bankruptcy.

Answer: False

An investment theory that assumes that a stock's value is determined by the company's earnings performance and financial performance.

Answer: Fundamental Theory

An order to purchase a stock you do NOT currently own at a price lower than the current market price because you believe the current market price is too high (but if it drops to your price you would want to own it).

Answer: Limit Buy Order

An order to sell a stock you currently own at a price higher than the current market price because you want to lock in your potential gains if the stock prices increases to that order price.

Answer: Limit Sell Order

A network of dealers who buy and sell securities that are NOT listed on a securities exchange.

Answer: Over-The-Counter (OTC) Market

The assigned dollar value that is printed on a stock certificate.

Answer: Par Value

This security, which often pays dividends, is considered a "middle Investment" because it is regarded as safer than common stock but not as safe as bonds.

Answer: Preferred Stock

All of the stocks, bonds, mutual funds, options and commodities traded on securities exchanges and over-the-counter markets.

Answer: Securities

Selling stock you do NOT presently own in the hope that you can cover your position by buying the stock later at a lower price than the selling price.

Answer: Selling Short

An order to sell a stock you currently own at a price lower than the current market price because you want to limit your losses and sell the stock if it ever drops to that order price.

Answer: Stop Order

An investment theory that assumes that a stock's value is determined by the forces and trends in the stock market itself.

Answer: Technical Theory

The calculation to determine the companys Current Return

Answer: The Annual Dividend Per Share) Times (the Number of Shares Owned) Times (the Number of Years the Stock is Owned)

The market index consisting of 30 major blue-chip companies.

Answer: The Dow Jones Industrial Average (or DJIA)

The electronic (rather than physical) stock market where more than 4,000 typically smaller, more growth-oriented stocks are traded.

Answer: The NASDAQ (or National Association of Securities Dealers Automated Quote) System

The market index consisting of 4,000 companies traded on the National Association of Securities Dealers Automated Quote System.

Answer: The NASDAQ Composite

The world's largest stock exchange.

Answer: The New York Stock Exchange

The market index consisting of a broad base of 500 major companies.

Answer: The Standard and Poor's 500 (or S&P 500)

True or false: A company only generates money from the sale of its stock when it issues new shares.

Answer: True