Explained - The Stock Market

What does an Initial Public Offering (IPO) allow a company to do?

• Borrow money from a bank at a lower interest rate.

• Sell shares of ownership to the public for the first time.

• Merge with another company to increase market share.

• Buy back its own shares from existing investors.

What are dividends in the context of stock market investments?

• Loans provided by banks to companies.

• Profits that a company distributes to its shareholders.

• Fees charged by stockbrokers for trading shares.

• The initial price at which a stock is sold during an IPO.

Which of the following statements accurately describes the difference between the New York Stock Exchange (NYSE) and Nasdaq?

• NYSE primarily trades tech companies, while Nasdaq focuses on traditional industries.

• NYSE is an older, physical exchange, while Nasdaq is a newer, electronic exchange.

• Nasdaq only trades bonds, whereas NYSE trades stocks.

• NYSE is located in London, and Nasdaq is in New York.

What is a primary benefit of the stock market for companies and the economy?

• It allows individual investors to control major corporations.

• It provides a platform for companies to borrow money directly from the government.

• It drives companies to make good decisions, leading to growth, jobs, and returns for shareholders.

• It guarantees high returns for all investors regardless of company performance.

In the decades following World War II, what was the perceived role of corporations regarding investment opportunities?

• To provide investment opportunities exclusively for the very wealthy.

• To generate superior returns only for executives and directors.

• To offer investment opportunities to average Americans, not just the very wealthy.

• To focus solely on maximizing profits for shareholders.

What investment strategy did Warren Buffett recommend for individuals who don't have time for detailed company analysis?

• Invest in high-risk, high-reward individual stocks.

• Give money to professional investors who try to beat the stock market.

• Buy a low-cost S&P 500 index fund.

• Focus on short-term trading based on market trends.

John Maynard Keynes used a "beauty contest" analogy to explain that successful stock market investing involves predicting what?

• The intrinsic value of a company's assets.

• Which companies will have the most innovative products.

• What other investors believe are the most attractive stocks.

• The long-term growth potential of an industry.

What did Milton Friedman state was the sole social responsibility of business?

• To maximize employee well-being

• To increase its profits

• To contribute to societal welfare

• To protect the environment

What percentage of earnings did S&P 500 companies spend on stock buybacks between 2007 and 2016?

• 39%

• 6%

• 55%

• 80%

What was the primary reason for the closure of the Wausau Paper mill in Brokaw, Wisconsin?

• Lack of demand for paper products

• A hedge fund pushed the company to cut costs instead of investing in new products

• The company failed to innovate and adapt to market changes

• Increased competition from international markets