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Stock Market Simulation Terms

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Stock Market Simulation Terms

  1. 1. Stock Market Simulation Terms Directions: To assist you in understanding how the stock market works, you will need to have an understanding of each of the following items. Answer each question listed below in your own words to ensure you understand them. This assignment will be due the day your paper is due over your involvement in the stock market simulation, however, the sooner you understand these terms, the better you are likely to do in the simulation. 1) What is a stock? 2) Why would a company decide to issue stock? 3) What are dividends? 4) Describe what common stock is. 5) Describe what preferred stock is. 6) What are blue chip stocks? 7) What are penny stocks? 8) What is the Dow Jones Industrial Average? How is it calculated? What does it indicate? 9) What is the S&P 500? How is it calculated? 10) If someone is buying on margin, what are they doing? What benefit would someone have by doing this? What negative is there involved in doing this? 11) What is a P/E ratio of a stock? Would a higher number or lower number be better to determine the earning potential of a stock? Why? 12) What is the NYSE? 13) What is NASDAQ? What kinds of stocks are normally issued here?
  2. 2. 14) If you purchase a stock, you may purchase an open order, a market order, or a closing order. What are the differences between them? 15) What does a limit order refer too? 16) If someone is selling short, what are they doing? 17) What does day trading refer too? Is this a good thing to do or bad thing to do? 18) What are mutual funds? Why do many people consider them to be a better investment than stocks? 19) What are bonds? What is one advantage of purchasing a bond? 20) What are CD’s? What is one advantage of purchasing a CD? 21) What does the 52 week high of a stock represent? How can you use this information to determine whether or not to purchase a stock? 22)What does the 52 week low of a stock represent? How can you use this information to determine whether or not to purchase a stock? 23)What does a good-till-cancelled order refer too? Why would someone want to do this? 24)What is a portfolio? Why would someone recommend you diversify your portfolio? 25)Why do stocks sometimes split? Is this good or bad for an investor if they own a stock that splits?

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