Stock Market Basics Quiz

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| By Lampe

Lampe

Community Contributor

Quizzes Created: 1 | Total Attempts: 5,275

Questions: 10 | Attempts: 5,275 | Updated: Mar 22, 2023

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Choose the most appropriate option from each question.

Questions and Answers

1.

What is the purpose of the DJIA?
- A.
  
  It is a company that invests in the stock market.
- B.
  
  It is an index of the 500 leading stocks in each industry traded in all markets.
- C.
  
  It is an index of the 30 leading stocks in each industry traded on the New York Stock Exchange.
- D.
  
  It is an index that gives general information about the performance of each stock.
- E.
  
  All of the above.
Correct Answer
C. It is an index of the 30 leading stocks in each industry traded on the New York Stock Exchange.

Explanation
The purpose of the DJIA is to serve as an index of the 30 leading stocks in each industry traded on the New York Stock Exchange. It provides a snapshot of the overall performance of these stocks, allowing investors to gauge the health and direction of the stock market. It is not a company that invests in the stock market, nor does it include all industries or all markets. Therefore, the correct answer is that it is an index of the 30 leading stocks in each industry traded on the New York Stock Exchange.

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2.

2. Two of the founders of the DJIA were
- A.
  
  Edward Jones and Charles Dow
- B.
  
  Alexander Hamilton and Charles Bernstegen
- C.
  
  J.P. Morgan and Chales Dow
- D.
  
  Bill Gates and Charles Dow
- E.
  
  Alexander Hamiltion and Charles Dow
Correct Answer
A. Edward Jones and Charles Dow

Explanation
Edward Jones and Charles Dow were two of the founders of the DJIA, also known as the Dow Jones Industrial Average. The DJIA is a stock market index that represents the performance of 30 large, publicly owned companies in the United States. Charles Dow was a journalist and co-founder of Dow Jones & Company, while Edward Jones was a statistician and co-founder of Dow Jones & Company. Together, they played a significant role in the creation and development of the DJIA, which has become one of the most widely followed stock market indices in the world.

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3.

Name one company on the DJIA today.
- A.
  
  AT&T
- B.
  
  Woolworths
- C.
  
  Sears & Roebuck
- D.
  
  U.S. Steel
- E.
  
  Disney
Correct Answer
E. Disney

Explanation
Disney is a company that is currently listed on the DJIA (Dow Jones Industrial Average). The DJIA is a stock market index that measures the performance of 30 large, publicly-owned companies in the United States. Disney, known for its entertainment and media products, is one of the companies included in this index.

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4.

Name one company listed on the DJIA in 1929.
- A.
  
  Microsoft
- B.
  
  United Airlines (UAL)
- C.
  
  International Harvester
- D.
  
  Disney
- E.
  
  Intel
Correct Answer
C. International Harvester

Explanation
International Harvester was a company listed on the DJIA in 1929. It was an American agricultural machinery and vehicle manufacturer, known for producing tractors, trucks, and construction equipment. Established in 1902, International Harvester was a prominent company during the early 20th century. However, due to the Great Depression and other factors, the company faced financial difficulties in the following years. Despite its eventual decline, International Harvester played a significant role in the agricultural and transportation industries during its time on the DJIA.

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5.

In which year did a stock market crash have no effect on the overall economy?
- A.
  
  2008
- B.
  
  1987
- C.
  
  1929
- D.
  
  2001
- E.
  
  1945
Correct Answer
B. 1987

Explanation
The stock market crash in 1987, also known as "Black Monday," had no significant impact on the overall economy. Despite the stock market plunging by over 22% in a single day, the crash did not lead to a recession or a prolonged economic downturn. The crash was mainly attributed to computerized trading and speculative trading practices, rather than underlying economic issues. The Federal Reserve and other central banks took swift action to stabilize the markets, which helped prevent a broader economic collapse.

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6.

What is a stock?
- A.
  
  An IOU of a corporation.
- B.
  
  A piece of ownership in a corporation.
- C.
  
  Total ownership of a corporation.
- D.
  
  A retirement investment.
- E.
  
  None of the above.
Correct Answer
B. A piece of ownership in a corporation.

Explanation
A stock represents a piece of ownership in a corporation. When an individual purchases a stock, they become a shareholder and have a claim on the company's assets and earnings. This ownership allows shareholders to participate in the company's profits through dividends and potentially gain from an increase in the stock's value. Therefore, the correct answer is "A piece of ownership in a corporation."

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7.

When you purchase a stock for $10.00 and then sell it one month later at $20.00 you are
- A.
  
  Buying low and selling high
- B.
  
  Buying high and selling low
- C.
  
  Short selling low and short covering high
- D.
  
  Short selling high and short covering low
- E.
  
  Gaining dividends
Correct Answer
A. Buying low and selling high

Explanation
When you purchase a stock for $10.00 and sell it one month later at $20.00, you are buying low and selling high. This means that you bought the stock at a lower price and sold it at a higher price, which is a profitable transaction.

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8.

When you recieve corporate profits from your ownership of stock you are
- A.
  
  Buying low and selling high
- B.
  
  Buying high and selling low
- C.
  
  Short selling low and short covering high
- D.
  
  Short selling high and short covering low
- E.
  
  Gaining dividends
Correct Answer
E. Gaining dividends

Explanation
When you receive corporate profits from your ownership of stock, you are gaining dividends. Dividends are a portion of a company's profits that are distributed to its shareholders. This is different from buying and selling stocks, as dividends are a form of income generated from the ownership of the stock, rather than the result of buying low and selling high or short selling.

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9.

What type of stocks would you want to short sell?
- A.
  
  Stock with the potential to gain value in the future
- B.
  
  Stock with high corporate profits
- C.
  
  Stock that may be experiencing lost value in the future
- D.
  
  Stock that will keep a constant value
- E.
  
  Never, it's too risky
Correct Answer
C. Stock that may be experiencing lost value in the future

Explanation
Short selling involves selling borrowed stocks in the hopes of buying them back at a lower price in the future. Therefore, the correct answer is "stock that may be experiencing lost value in the future." By short selling stocks that are expected to decrease in value, investors can profit from the price decline. This strategy is typically used by traders who believe that a particular stock or market is overvalued and will decline in the future.

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10.

What professions are associated with financial markets?
- A.
  
  Stock broker
- B.
  
  All of the options listed
- C.
  
  Investment banker
- D.
  
  Commodities broker
- E.
  
  Bond dealer
Correct Answer
B. All of the options listed

Explanation
All of the options listed (stock broker, investment banker, commodities broker, bond dealer) are professions that are associated with financial markets. These professionals play different roles in the financial industry, such as facilitating the buying and selling of stocks, bonds, and commodities, providing investment advice, managing investments, and executing financial transactions. Therefore, all of these options are correct in terms of being professions associated with financial markets.

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Current Version
Mar 22, 2023

Quiz Edited by
ProProfs Editorial Team
Jun 19, 2009

Quiz Created by
Lampe

Stock Market Basics Quiz

What is the purpose of the DJIA?

2. Two of the founders of the DJIA were

Name one company on the DJIA today.

Name one company listed on the DJIA in 1929.

In which year did a stock market crash have no effect on the overall economy?

What is a stock?

When you purchase a stock for $10.00 and then sell it one month later at $20.00 you are

When you recieve corporate profits from your ownership of stock you are

What type of stocks would you want to short sell?

What professions are associated with financial markets?