General Awareness: Stock Market Basics Quiz (Set - 2)

1. A sub-section of the London Stock Exchange is called AIM. What does this acronym stand for?

a) Amalgamated Investment Materials
b) Alternative Issue Medium
c) Associated Investment Managers
d) Alternative Investment Market

The correct answer is d) Alternative Investment Market

2. Why might an investor "short" a particular stock or share?

a) In the belief that the price will fall
b) In expectation of good news from the company
c) In the belief that the price will rise
d) In the hope that the company will be taken over

The correct answer is a) In the belief that the price will fall

3. I have just instructed my stockbroker to sell one of my holdings using a "fill or kill" trade. What have I asked him to do?

a) Sell a stock at a fixed price or do not sell at all
b) Wait until the price attains a certain level and then sell
c) Sell a stock at any price available
d) Get a good price or jump off a roof

The correct answer is a) Sell a stock at a fixed price or do not sell at all

4. I am fairly confident that a company I want to invest in will have a good year but just in case I'm wrong I want to "hedge" my risk. Which of the following combinations of manufacturing companies might be a good "hedging" strategy?

a) mobile phones / pocket calculators
b) wallpaper / household paint
c) sun loungers / suntan lotion
d) waterproof boots / ice cream

The correct answer is d) waterproof boots / ice cream

5. I am told by my pension adviser that my retirement fund has now been placed in an investment vehicle run by a professional institution, co-mingled with other investors' money and spread throughout various sectors of the investment market. The returns obtained will be totally dependent upon investment performance with no underlying guarantees. Which type of fund am I now invested in?

a) Cash Fund
b) Balanced Managed Fund
c) Self Invested Personal Pension
d) Deferred Annuity Contract

The correct answer is b) Balanced Managed Fund

6. Speculation on which region's stock markets caused Nick Leeson to bring about the collapse of Barings Bank in 1995?

a) Asia
b) North America
c) Europe
d) Middle East

The correct answer is a) Asia

7. I need to raise capital for my company, which is already listed on a stock exchange, but do not wish to increase the number of shares in circulation. Which of the following might achieve this objective?

a) Bond issue
b) Open offer
c) Rights issue
d) Stock buy back

The correct answer is a) Bond issue

8. In stock market terms which event is now known as the South Sea Bubble?

a) The first exchange opened on the Antarctic icepack
b) Discovery of oil and gas in the Falkland Islands
c) A scandal on the London Stock Exhange during the early 1700s
d) The opening of trade routes to Australia

The correct answer is c) A scandal on the London Stock Exhange during the early 1700s

9. When looking at stock prices I notice that the buying price is usually lower than the selling price. What is the technical name for this differential?

a) Bid / Offer Spread
b) Bid / Offer Chasm
c) Buy / Sell Void
d) Buy / Sell Interval

The correct answer is a) Bid / Offer Spread

10. I have just been arrested and charged with "insider dealing". What crime have I committed?

a) Selling my own shares to family members
b) Failing to execute a trade when instructed
c) Trading stock outside normal market hours
d) Trading stock for my own gain using confidential information

The correct answer is d) Trading stock for my own gain using confidential information