Name: Date:

Stock Market Basics

Buy long or sell short? Market order or limit order? Test your knowledge of the stock market with
this quiz. Carefully read each question, and circle the letter of the correct answer.

1. Ownership shares of a corporation are known as stocks. There are two types, common
stock and:

a. Bonds

b. Preferred stock

c. Mutual funds

2. When stock prices rise for an extended period of time it is called a(n):

a. Investor's dream

b. Bull market

c. Bear market

3. The New York Stock Exchange is located in a district named for what famous street?

a. Wall Street

b. Broadway

c. Fifth Avenue

4. Wall Street got its name because it:

a. Was part of Abner Wall's farm

b. Is an English corruption of the early Dutch name, Vall Street

c. Originally ran beside a wall

5. The Buttonwood Agreement established the:

a. New York Stock Exchange

b. Periodic expansion of the New York Stock Exchange

c. Securities and Exchange Commission

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6. The New York Stock Exchange is owned by:

a. The U.S. Government

b. The Dow Jones Corporation

c. Its members

7. The Dow Jones Industrial Average tracks the performance of the stocks of:

a. 100 large manufacturing companies

b. 30 large companies in various industries

c. All firms listed on the New York Stock Exchange

8. On January 4, 2001, a record number of shares changed hands on the New York Stock
Exchange. That number was approximately:

a. 100 million

b. 1 billion

c. 2 billion

9. The federal agency most involved with regulation of stocks and stock markets is the:

a. Securities Exchange Commission

b. Federal Reserve Bank

c. Federal Deposit Insurance Corporation

10. The National Association of Securities Dealers Automated Quotation System, NASDAQ,
is what:

a. An electronic stock market

b. A system for tracking high-technology stocks

c. The Internet branch of the New York Stock Exchange

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Answer Key: Stock Market Basics

1. [b. Preferred stock] While both common and preferred stock show ownership in a
corporation, holders of preferred stock have the first claim on earnings, and on company
assets in the event of liquidation. A bond is an IOU from a business or government entity
promising to repay the purchase amount with interest over a certain period of time. A
mutual fund is a pool of investors jointly owning shares in various investments, usually
with a specific objective and managed by a professional.

2. [b. Bull market] When stock prices rise over an extended period, is known as a bull
market. When prices decline, it is called a bear market.

3. [a. Wall Street] The New York Stock Exchange is officially located on Wall Street, also
home to a number of other financial institutions. It is the most important financial address
in the world. However, the stock exchange is actually a vast complex with several Wall
Street and Broad Street addresses.

4. [c. Originally ran beside a wall] In 1653 Dutch settlers built a stockade fence along the
northern border of the settlement of New Amsterdam for protection from the British and
the Indians. In 1685 a street was laid out along the wall. As the city expanded north, the
wall was eventually taken down, but the street retained its name.

5. [a. New York Stock Exchange] On May 17, 1792, twenty-four New York brokers met
under a Buttonwood tree, at what is now 68 Wall Street, and agreed to trade with each
other and charge standard fees to their customers, thus beginning the New York Stock
Exchange. It has expanded over time as conditions required. Congress created the
Securities and Exchange Commission in 1934 to enforce recently-passed securities
laws.

6. [c. Its members] The New York Stock Exchange is a non-profit company owned by its
1,366 members. In 1882, Charles Dow and Edward Jones began publishing a financial
newsletter that later became The Wall Street Journal.

7. [b. 30 large companies in various industries] The Dow Jones Industrial Average tracks
the performance of the stock of 30 large firms, all leaders in their fields, which include
financial services, food, technology, retail, heavy equipment, oil, chemical,
pharmaceutical, consumer goods, and entertainment. To be included on the list, a stock
must be held by many investors. Together, the stocks on the list comprise about 20% of
the value of all U.S. stocks.

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8. [c. 2 billion] On that day, 2,129,445,637 shares were bought or sold, setting a record.
The lowest trading day was March 16, 1839, when 31 shares exchanged hands.

9. [a. Securities Exchange Commission] In the aftermath of the stock market crash of 1929,
Congress passed a number of laws regulating the stock markets and protecting
investors. The Securities and Exchange Commission was formed to enforce these laws
in 1934. The Federal Reserve was founded in 1913 to provide a safer and more stable
monetary and financial system, while the Federal Deposit Insurance Corporation was
formed in 1933 to insure deposits in the nation’s banks and to promote safe banking
practices.

10. [a. An electronic stock market] Established in 1971, NASDAQ is the world's first
electronic stock market. Located in New York City's Time Square, NASDAQ trades an
average of 1.7 billion shares per day. There are 4,892 companies, including Microsoft
and Intel, with a total capitalization of $5.56 trillion listed on NASDAQ.

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