Successful Investing Quiz Sample

As a Stock Market Companion subscriber, you not only receive access to our powerful 15Minute Market Update, Watchlist, and Webinars. You also have access to our Successful Investing Quizzes that are designed to teach you valuable insights on how global and business finance and successful stock investing all fit together.

Here is an example of one of our exciting and challenging quizzes that is designed to help you put the pieces together –

Stock Market Companion – Successful Investing Quiz 1

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Question 1

During which famous period in Western civilization was the idea of the “corporation” born and used commercially?

A	Renaissance Period
B	Dark Ages
C	After the “New World” was found

Question 1 Explanation:

The Renaissance Period birthed the idea and implementation of corporations – in order to extend the life of an enterprise beyond the limits of the life of an individual AND to limit personal liability of business owners. Today, corporations have many of the rights of an individual, but protects the individual shareholders (to a large extent) from personal liability.

Question 2

Ford Motor Co. (Ticker: F) earned these amounts (U.S.$/share) in each of the preceding 4 quarters –

Q2 2011 = $0.65 ;

Q1 2011 = $0.62 ;

Q4 2010 = $0.30 ;

Q3 2010 = $0.48 ;

If Ford’s closing price today was $10.86/share, what is it’s “trailing 12 month” Price / Earnings ratio ?

A	5.3
B	9.0
C	16.7

Question 2 Explanation:

We can simply add up each of the previous 4 quarters of earnings and divide today’s price by that sum. Here goes … 0.65+0.62+0.30+0.48=$2.05

$10.86/$2.05 = 5.3 Price / Earnings Ratio

The market average price / earnings ratio is approx. 16, so you can see that the shares of Ford Motor Co. are selling at a strong discount to the overall market. There may be a reason for this. For instance, the upcoming labor union negotiations may be tough for the company and the U.S. is on the edge of a recession, so car sales may again fall off…

Question 3

What is one of the individual stock investor’s greatest advantages?

A	The ability to decide when to be in the market and when to be out of the market.
B	The ability to buy and hold a stock. Hint: At Stock Market Companion we teach our subscribers to engage stocks based on strategic entries AND exits. If the story behind a stock changes or the background market begins to weaken, it’s wise to take profits quickly and head to the sidelines.
C	The ability to put “everything” on one stock investment. Hint: It’s never wise to put all our eggs in one stock investment. There are all kinds of things that could happen that could be disastrous. However there are times that we can heavily overweight a particular investment.

Question 4

What event marked the recent top in the market on May 2, 2011?

A	Osama bin Laden’s destruction on May 2, 2011
B	The end of the Federal Reserve’s QE2
C	The earthquake and subsequent tsunami in Japan

Question 4 Explanation:

The market gaped up higher in the morning of May 2, 2011 on the news of Osama bin Laden’s death, but couldn’t hold its gains. The market closed below its open on that day. This signified to many that there were “no more buyers left” for the broader market.

Question 5

The market is heavily influenced by geo-political events, monetary policy, supply and demand, fear of loss, greed, government intervention in commerce, taxation … BUT what is the most important variable underlying the intermediate term value of the market and individual stocks?

A	Near future corporate earnings
B	Interest rates
C	Debt-ceiling debates

Question 5 Explanation:

Investors are primarily focused on near future corporate earnings expectations at publicly traded companies.

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