Question 1

The S&P Indexes are often used by professionals because they are weighted by total market value of the companies in the index.

Accepted Answer

The S&P Indexes, such as the S&P 500, are weighted by market capitalization, which is the total market value of the companies included in the index. This weighting method is commonly used by professionals in the finance industry.

Question 2

The Value Line Average contains stocks from several exchanges or markets.

Accepted Answer

The Value Line Average contains stocks from NYSE, NYSE MKT and NASDAQ exchanges.

Question 3

Korean stock prices are measured by the Nikkei 225 average.

Accepted Answer

The Nikkei 225 average measures the stock performance of Japanese companies on the Tokyo Stock Exchange. Korean stock prices are measured by the KOSPI (Korea Composite Stock Price Index) or KOSDAQ (Korea Securities Dealers Automated Quotations) indexes.

Question 4

The Standard & Poor's Indexes are price-weighted indexes.

Accepted Answer

The Standard & Poor's Indexes are actually market-capitalization weighted indexes.

Question 5

The Russell 2000 measures performance of the 2000 largest stocks,based on market value.

Accepted Answer

The Russell 2000 specifically measures the smallest of the Russell 3000 stocks.

Question 6

Large,established companies make up the Dow Jones Industrial Average.

Accepted Answer

The Dow Jones Industrial Average (DJIA) is comprised of 30 large, established companies that are leaders in their respective industries. These companies are considered to be representative of the overall performance of the stock market and the economy.

Question 7

The divisor in the Dow Jones Industrial Average equals 30.

Accepted Answer

The divisor in the Dow Jones Industrial Average is not a fixed number like 30; it is a fraction that changes over time to account for stock splits, spinoffs, and other adjustments, ensuring the index's continuity.

Question 8

Good till canceled (GTC)orders expire automatically after a set period of time.

Accepted Answer

Good till canceled (GTC) orders do not have a set expiration time and will remain active until they are filled or canceled by the trader.

Question 9

The base period for the Standard & Poor's Stock Indexes is 1957-58.

Accepted Answer

For the S&P 500 Stock Index, the base period is 1941-43.

Question 10

The Standard & Poor's 500 Stock Index is widely followed by professional money managers as a measure of broad stock market activity.

Accepted Answer

This statement is true. The S&P 500 is one of the most widely used benchmarks for evaluating the performance of large-cap U.S. stocks, and many professional money managers use it as a reference point for their investment decisions.

Question 11

The Value Line Average reflects changes in stock prices,rather than value of shares outstanding.

Accepted Answer

The Value Line Average tracks the performance of a group of stocks, but it is based on changes in stock prices rather than the value of shares outstanding.

Question 12

The Wilshire 5000 index includes all stocks on the New York and American Stock Exchanges,and most active NASDAQ issues.

Accepted Answer

The Wilshire 5000 index is a market capitalization-weighted index that includes all stocks actively traded in the United States, including stocks listed on the New York and American Stock Exchanges, as well as most active NASDAQ issues. Therefore, the statement is true.

Question 13

A value-weighted index tends to give more importance to large companies than small companies.

Accepted Answer

A value-weighted index calculates the weight of each stock based on its market capitalization (i.e. the total value of its outstanding shares) and thus, larger companies with higher market caps will have a greater impact on the overall index value. This means that large companies tend to have more influence on the index than small companies.

Question 14

The indexes of The New York Stock Exchange,American Exchange,and NASDAQ are all price-weighted.

Accepted Answer

The New York Stock Exchange and American Exchange are both market-capitalization weighted, while NASDAQ is a hybrid of market-capitalization and equal-weighted indexes.

Question 15

The Value Line Average is an equal-weighted index.

Accepted Answer

The Value Line Average is an equal-weighted index, with each of the 1700 stocks weighted equally, regardless of market price or total market value.

Question 16

The Dow Jones Industrial Average is not adjusted for stock splits.

Accepted Answer

The Dow Jones Industrial Average used to be a simple average of 30 stocks, but when a company splits its stock price, the average has to be adjusted.

Question 17

The Dow Jones Composite index combines the Dow Jones Industrial,Transportation,and Utility averages into an index of 65 stocks.

Accepted Answer

The Dow Jones Composite index does indeed combine the Dow Jones Industrial Average, Transportation Average, and Utility Average into an index of 65 stocks.

Question 18

A change in a high-priced stock's value has a greater impact on the Dow Jones Industrial Average than a change in a low-priced stock.

Accepted Answer

The Dow Jones Industrial Average is a price-weighted index, meaning that stocks that have a higher price per share have a greater impact on the index's value. Therefore, a change in the value of a high-priced stock will have a greater impact on the Dow Jones Industrial Average than a change in the value of a low-priced stock.

Question 19

The Standard & Poor's Midcap Index is composed of 500 middle-sized firms.

Accepted Answer

The S&P Midcap Index is composed of 500 middle-sized firms.

Question 20

The Dow Jones Industrial Average is a value-weighted index.

Accepted Answer

The Dow Jones Industrial Average is a price-weighted average.

Quiz 3: Participating in the Market