Stock Market Rules Chapter 1

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Stock Market Rules Chapter 1 - Quiz

Stock Market Quiz for Michael


Questions and Answers
  • 1. 

    A good investor must become familiar with the ____________ action of the market and the stock of interest

    • A.

      Past

    • B.

      Buyer

    • C.

      Current

    • D.

      Seller

    • E.

      Future

    Correct Answer
    C. Current
    Explanation
    To be a good investor, one must be knowledgeable about the current action of the market and the stock of interest. This means staying updated on the latest trends, news, and events that may impact the market and the specific stock. By understanding the current state of the market and the stock, an investor can make more informed decisions and potentially capitalize on opportunities for profit.

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  • 2. 

    Bad timing and poor strategy can be caused by _____________.

    Correct Answer
    misunderstandings
    Misunderstandings
    Explanation
    Bad timing and poor strategy can be caused by misunderstandings. Misunderstandings can lead to miscommunication, lack of clarity, and confusion, which can ultimately result in poor timing and ineffective strategies. When team members or stakeholders do not have a clear understanding of the goals, objectives, or expectations, it can lead to mistakes, delays, or misaligned actions. Therefore, addressing and resolving misunderstandings is crucial for ensuring effective timing and strategy implementation.

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  • 3. 

    If there are more buyers than sellers the prices____________.

    • A.

      Fall

    • B.

      Rise

    Correct Answer
    B. Rise
    Explanation
    When there are more buyers than sellers, it creates a higher demand for the product or service. This increased demand puts upward pressure on prices as buyers compete for limited supply. As a result, prices tend to rise in this situation.

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  • 4. 

    If there are more sellers than buyers the prices _____________.

    • A.

      Fall

    • B.

      Rise

    Correct Answer
    A. Fall
    Explanation
    When there are more sellers than buyers in a market, it creates an oversupply of goods or services. This leads to increased competition among sellers to attract buyers, resulting in a decrease in prices. As sellers try to sell their products quickly, they may lower their prices to make them more attractive to buyers. Therefore, when there is an imbalance between sellers and buyers, the prices are likely to fall.

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  • 5. 

    The stock market is a ________________   ______________  with the same products being bought and sold every day.

    Correct Answer
    continuous auction
    Explanation
    The stock market is referred to as a continuous auction because it operates continuously throughout the trading day, with buyers and sellers constantly placing orders to buy or sell stocks. This means that there is a continuous flow of transactions happening in the market, with the same products (stocks) being bought and sold every day. The term "auction" implies that the market operates based on competitive bidding, where buyers and sellers compete to determine the price at which a stock is bought or sold.

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  • 6. 

    The stock market always trades.....

    • A.

      Due to current prices and trends.

    • B.

      In anticipation for the future.

    • C.

      Based on past sales.

    Correct Answer
    B. In anticipation for the future.
    Explanation
    The stock market always trades in anticipation for the future. This means that investors buy and sell stocks based on their predictions and expectations of how the market will perform in the future. They analyze various factors such as economic indicators, company earnings, and market trends to make informed decisions about buying or selling stocks. The stock market is driven by the anticipation of future profits or losses, as investors aim to maximize their returns by making strategic investment choices.

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  • 7. 

    Money availibility can change with....(check all that apply)

    • A.

      Movement of Interest rates

    • B.

      Earning of a Corporation

    • C.

      Having Investors

    Correct Answer(s)
    A. Movement of Interest rates
    B. Earning of a Corporation
    Explanation
    The availability of money can change with the movement of interest rates and the earning of a corporation. When interest rates increase, borrowing becomes more expensive, leading to a decrease in the availability of money. On the other hand, when interest rates decrease, borrowing becomes cheaper, resulting in an increase in the availability of money. Additionally, the earning of a corporation can also impact the availability of money. If a corporation is making significant profits, it may have more funds available to invest or lend, thus increasing the availability of money.

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  • 8. 

    A ____________________ gives their opinion as to the current weakness or strength of the stock market.

    Correct Answer(s)
    market analysis
    economist
    Explanation
    A market analysis is a process of evaluating the current state of the stock market, including its weaknesses and strengths. It involves studying various factors such as market trends, economic indicators, and company performance to form an opinion. An economist, on the other hand, is a professional who specializes in studying and analyzing economic trends, including the stock market. They use their knowledge and expertise to provide insights and opinions on the current state of the stock market, including its weaknesses and strengths. Therefore, both a market analysis and an economist can give their opinion on the current weakness or strength of the stock market.

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  • 9. 

    Give an example of an imagined factor and fabricated factor?

  • 10. 

    _________________ is when buyers enter a downtrend and stop the decline.

    • A.

      Assistance

    • B.

      Support

    • C.

      Reinforcement

    • D.

      Foundation

    • E.

      Provision

    Correct Answer
    B. Support
    Explanation
    Support is the correct answer because it refers to the concept in which buyers step in during a downtrend and prevent further decline in price. When the market is experiencing a downward movement, support levels are formed at certain price points where buyers are willing to purchase the asset, creating a floor for the price and stopping the decline. This is a key concept in technical analysis and is often used by traders to identify potential buying opportunities.

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  • 11. 

    _____________________ is where the price stops declining and either flattens out or begins to retrace its upward trend.

    • A.

      Substructure

    • B.

      Foundation

    • C.

      Floor

    • D.

      Bottom

    • E.

      Hault

    Correct Answer
    D. Bottom
    Explanation
    The term "bottom" refers to the point where the price of a particular asset stops falling and starts to stabilize or even rise again. It indicates the end of a downward trend and the potential beginning of an upward movement. This term is commonly used in financial markets to describe a significant support level where buyers may step in and prevent further decline in price. Therefore, "bottom" is the correct answer as it accurately describes the situation where the price stops declining and starts to either flatten out or reverse its trend.

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  • 12. 

    It is always good to invest in a stock that has declined or seems to be "on sale."

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Investing in a stock that has declined or seems to be "on sale" is not always a good idea. While it may seem tempting to buy stocks at a lower price, there could be underlying reasons for the decline such as poor financial performance or market trends. It is important to thoroughly analyze the reasons behind the decline and assess the future potential of the stock before making an investment decision. Therefore, the statement is false.

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  • 13. 

    From your readings, What are the common reasons a price decline could be serious? (Check all that apply)

    • A.

      Lower earnings or estimates are predicted.

    • B.

      Possible lawsuit.

    • C.

      Low credit ratings.

    • D.

      Employee strike

    • E.

      Tax problems

    Correct Answer(s)
    A. Lower earnings or estimates are predicted.
    B. Possible lawsuit.
    C. Low credit ratings.
    E. Tax problems
    Explanation
    A price decline could be serious if lower earnings or estimates are predicted because it indicates a decrease in profitability and potential financial instability. A possible lawsuit could also lead to a serious price decline as it may result in significant legal expenses and damage to the company's reputation. Low credit ratings can be a cause for concern as it suggests that the company may have difficulty obtaining financing or may face higher borrowing costs. Tax problems can also be a serious issue as it may result in penalties, fines, or legal consequences, impacting the company's financial health.

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  • 14. 

    From your readings, What are the common reasons a price decline might NOT be so serious?

    • A.

      Company stock is taking a break

    • B.

      Market correction

    • C.

      Profit taking from employee stock distribution

    • D.

      Cheaper to buy

    • E.

      No news related reason at all

    Correct Answer(s)
    B. Market correction
    C. Profit taking from employee stock distribution
    E. No news related reason at all
    Explanation
    A price decline may not be so serious if it is due to a market correction, which is a temporary adjustment in stock prices that does not reflect the underlying value of the company. Profit taking from employee stock distribution can also lead to a price decline, but it may not be a cause for concern as it is simply employees selling their shares to realize their gains. Additionally, if there is no news related reason for the price decline, it may not be a serious issue as it suggests that there are no negative developments or events affecting the company.

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  • 15. 

    Information about _______________(s) can be otained through news media, the internet, or by calling the company direct.

    Correct Answer(s)
    stock
    Stock
    Stocks
    Explanation
    The information about stocks can be obtained through news media, the internet, or by calling the company directly. This suggests that the question is asking about the plural form of the word "stock," which is "stocks." The correct answer is "stocks" because it aligns with the context of the sentence and the options provided.

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  • 16. 

    What kind of strategy can an investor make from learning why a stock is declining?

  • 17. 

    Usually the best time to buy in a stock is when.......

    • A.

      A uptrend turns down and solidly crosses the trend line.

    • B.

      A downtrend turns up and solidly crosses the trend line.

    • C.

      A downtrend turns up and stays at the trend line.

    • D.

      A uptrend rises and remains at the trend line.

    Correct Answer
    B. A downtrend turns up and solidly crosses the trend line.
    Explanation
    The best time to buy a stock is when a downtrend turns up and solidly crosses the trend line. This is because it indicates a potential reversal in the stock's price movement. When a downtrend turns up and crosses the trend line, it suggests that the selling pressure is diminishing and buying pressure is increasing. This can be seen as a signal that the stock's price may start to rise in the future. By buying at this point, investors can take advantage of the potential upward movement in the stock's price.

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