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Questions and Answers
What are the two ways stockholders earn a return?
What are the two ways stockholders earn a return?
What is the main difference between common stock and preferred stock?
What is the main difference between common stock and preferred stock?
What is a critical feature of well-developed and efficient stock markets?
What is a critical feature of well-developed and efficient stock markets?
When did organized exchanges begin trading stocks?
When did organized exchanges begin trading stocks?
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What replaced the idea of a specific trading location for organized exchanges?
What replaced the idea of a specific trading location for organized exchanges?
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What do stockholders have claim on?
What do stockholders have claim on?
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What is a characteristic of preferred stock?
What is a characteristic of preferred stock?
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What is the main function of organized exchanges?
What is the main function of organized exchanges?
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What is the daily volume of the NYSE in terms of shares?
What is the daily volume of the NYSE in terms of shares?
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What replaced the idea of a specific trading location for organized exchanges?
What replaced the idea of a specific trading location for organized exchanges?
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Study Notes
Stockholders' Returns
- Stockholders can earn a return through dividends, which are portions of the company's profit distributed to shareholders.
- Stockholders can also earn a return through capital appreciation, which is the increase in value of their shares over time.
Types of Stocks
- The main difference between common stock and preferred stock is that preferred stock has a higher claim on assets and earnings, and its dividends are fixed and must be paid before common shareholders receive any dividends.
- Preferred stock has a characteristic of fixed dividend payments, which are paid before common shareholders receive any dividends.
Organized Exchanges
- A critical feature of well-developed and efficient stock markets is the presence of organized exchanges, which facilitate the trading of securities.
- Organized exchanges began trading stocks in the 17th century in Amsterdam.
- The idea of a specific trading location has been replaced by electronic communication networks (ECNs), which have increased efficiency and reduced costs.
Stockholder Claims
- Stockholders have a claim on both residual income and assets, meaning they are entitled to a share of the company's profits and assets.
Organized Exchanges Function
- The main function of organized exchanges is to provide a platform for buyers and sellers to trade securities.
NYSE Volume
- The New York Stock Exchange (NYSE) has a daily volume of hundreds of millions of shares.
Evolution of Trading
- Electronic communication networks (ECNs) have replaced the idea of a specific trading location for organized exchanges.
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Description
Test your knowledge of stock market investing with this quiz on the basics of stocks. Identify the key features and benefits of owning stocks, including ownership rights, returns, and types of stock.
