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12 Questions

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Understanding the Stock Market Basics

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Questions and Answers

What is the main purpose of the stock market?

To facilitate the trading of rare art and collectibles

To allow investors to gamble on stock prices

To provide a platform for companies to raise funds from the public (correct)

To regulate the prices of goods and services

What determines the price of a stock?

The company's performance and profitability

The number of investors buying and selling the stock (correct)

The personal preferences of the company's executives

The number of shares issued by the company

What is the primary difference between value investing and day trading?

Value investors use fundamental analysis, while day traders use technical analysis

Value investors invest in a diversified portfolio, while day traders focus on a single stock

Value investors focus on long-term growth, while day traders focus on short-term price movements (correct)

Value investors buy stocks with high dividends, while day traders focus on high-risk, high-reward stocks

What is the purpose of a market index, such as the S&P 500 or Dow Jones Industrial Average?

To track the performance of a group of stocks Signup and view all the answers

Which of the following is NOT a common investment strategy in the stock market?

Cryptocurrency trading Signup and view all the answers

What is the primary role of a stock exchange, such as the NYSE or Nasdaq?

To match buyers and sellers of stocks and facilitate transactions Signup and view all the answers

What happens when more investors want to buy a particular stock?

The stock price increases Signup and view all the answers

Which of the following is NOT a common investment strategy used by investors in the stock market?

Speculative trading Signup and view all the answers

What happens when an investor sells a stock?

The investor gives up ownership in the company Signup and view all the answers

What is the primary purpose of a stock exchange, such as the NYSE or Nasdaq?

To facilitate the buying and selling of shares between investors Signup and view all the answers

What is the main purpose of a market index, such as the S&P 500 or Dow Jones Industrial Average?

To track the performance of a group of stocks Signup and view all the answers

What is the primary function of the stock market?

To provide a platform for companies to raise capital Signup and view all the answers