Chapters 11-13 Test

What is the primary goal of investing?

• Spending money on luxuries

• Saving money in a bank account

• Growing wealth over time

• Avoiding all financial risk

What does a stock represent?

• A loan to a company

• Ownership of a company

• A company's profit margin

• A guaranteed return

Dividends are typically paid to shareholders on what schedule?

• Daily

• Weekly

• Quarterly

• Annually

What is a market order in stock trading?

• A request to buy or sell at a specified price

• A trade executed immediately at the current price

• A trade executed when the market closes

• An order that expires after a day

What is the formula for Earnings Per Share (EPS)?

• Total revenue / Number of employees

• Profit / Number of outstanding shares

• Market price / Total earnings

• Total earnings / Market capitalization

What does a high P/E ratio potentially indicate?

• Overvaluation or high growth expectations

• Strong dividend payments

• Low profitability

• Weak industry performance

A bull market is characterized by:

• Falling stock prices

• Rising stock prices

• Stable stock prices

• High bond prices

What is the purpose of diversification in investing?

• To maximize short-term returns

• To reduce risk by spreading investments

• To invest in only one type of asset

• To avoid paying taxes

Which type of investment typically has the lowest fees?

• Mutual funds

• Index funds

• Actively managed funds

• Hedge funds

Which account type allows tax-free withdrawals in retirement?

• Traditional IRA

• Roth IRA

• 401(k)

• Individual brokerage account