Module 2 Quiz: Stock Market Basics

What role do market makers play in the stock market?

A

They issue new stocks during IPOs

B

They ensure liquidity by continuously buying and selling shares

C

They regulate stock exchanges

D

They act as retail investors buying stocks for themselves

Which of the following best describes a stock?

A

A certificate of ownership representing a fractional share in a company

B

A debt instrument issued by companies

C

A government bond traded on exchanges

D

A private ownership agreement between two investors

When a buyer places an order for shares, what is the correct flow of the transaction?

A

Buyer → Stock Exchange → Broker → Seller

B

Buyer → Seller directly without any intermediaries

C

Buyer → Broker → Stock Exchange → Broker (seller) → Seller

D

Buyer → Market Maker → Stock Exchange → Seller

Which of the following is NOT an example of a stock exchange?

A

NASDAQ

B

LSE

C

NYSE

D

DJIA

What is the primary purpose of an Initial Public Offering (IPO)?

A

To allow investors to buy stocks from secondary markets

B

To enable private companies to sell shares publicly and raise capital

C

To merge two companies into one

D

To issue bonds to the public

How is Market Capitalization calculated?

A

Outstanding Shares * Earnings Per Share

B

Stock Price / Number of Shares

C

Outstanding Shares * Stock Price

D

Number of Shares / Stock Price

Which market cap category is generally considered the riskiest but offers high growth potential?

A

Small-cap

B

Large-cap

C

Mid-cap

D

Mega-cap

What happens during a bear market?

A

Prices drop by 20% or more, investor fear and pessimism dominate

B

Dividends are increased to retain investors

C

Stock prices rise steadily for a prolonged period

D

Companies issue more IPOs to raise capital

Which investors are considered “retail investors”?

A

Hedge funds and pension managers

B

Market makers who ensure liquidity

C

Individual traders and everyday investors

D

Investment banks that facilitate IPOs

Ticker symbols on the stock market are used to:

A

Indicate the financial health of a company

B

Calculate market capitalization

C

Represent the company’s annual dividend yield

D

Identify companies quickly for trading purposes

Which of the following is true about a bull market?

A

Market capitalization decreases consistently

B

Prices rise and optimism is high, often driven by FOMO

C

Investor confidence is low and prices fall sharply

D

IPO activity typically halts during bull markets

Before going public, a company must file disclosures with which regulatory body?

A

Securities and Exchange Commission (SEC)

B

Internal Revenue Service (IRS)

C

Department of Commerce

D

Federal Reserve

Which of the following best describes institutional investors?

A

Individual traders using apps like Robinhood

B

Hedge funds, mutual funds, and pension managers managing large sums

C

Market makers facilitating liquidity

D

Companies issuing stocks during IPOs

Which event is an example of a historical bear market?

A

The 2008 financial crisis

B

The tech boom of the late 1990s

C

IPO surge of 2021

D

The 2009–2020 period

What is the significance of an IPO roadshow?

A

Trading session where IPO shares first become available

B

Public celebration of a company’s new product launch

C

Company presenting to large investors to build demand before IPO

D

SEC approval meeting for the IPO

Which of these factors does NOT typically influence stock prices?

A

Supply and demand dynamics

B

Number of company employees

C

Global economic events

D

Company earnings reports

If a company has a stock price of $50 and 10 million outstanding shares, what is its market cap?

A

$500 million

B

$5 million

C

$50 million

D

$5 billion

Which exchange is known for hosting many tech companies?

A

NYSE

B

London Stock Exchange

C

NASDAQ

D

Tokyo Stock Exchange

Which type of investor is most likely to panic sell during a bear market?

A

Institutional investors

B

Market makers

C

Company insiders

D

Retail investors

How does an IPO help a company besides raising capital?

A

It allows companies to borrow money from the government

B

It guarantees long-term stock price increases

C

It exempts the company from regulatory filings

D

It provides prestige and increased public awareness

Which statement about exchanges is true?

A

They facilitate trades by matching buy and sell orders

B

They operate only during bear markets

C

They manufacture stocks for companies

D

They set stock prices manually every day

What is one key difference between the NYSE and NASDAQ?

A

Both are identical in every way

B

NYSE only lists bonds, NASDAQ only lists stocks

C

NASDAQ does not allow retail investors to trade

D

NYSE is a physical auction market, NASDAQ is an electronic exchange