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1.
Hearing a negative event about a company that drives its stock price down but does not affect its fundamentals can be a welcome thing to many investors.
True. If the fundamentals are strong, then this could be a buying opportunity.
2.
Which of the following would most likely affect a company's long-term investment outlook?
The Securities and Exchange Commission is investigating the company to determine if it fraudulently misstated its financial results for the past several years. A slight earnings miss or analyst downgrade would not explicitly change a company's intrinsic value, and both events are very short-term focused. An SEC investigation into accounting could materially impact the investment outlook, however.
3.
Which of the following stock indexes is price-weighted?
Dow Jones Industrial Average. The Dow is price-weighted. The Nasdaq Composite Index and the SP 500 Index are market-cap-weighted.
4.
If a company's actual earnings results are different from what analysts expect, this is known as _______.
An earnings surprise. An "earnings surprise" happens when a company's actual earnings results are different from what Wall Street's analysts expect. A stock split is when a company issues more shares to its shareholders, and the stock price falls to account for the ownership dilution.
5.
The divisor used to calculate the Dow Jones Industrial Average _______.
Has been shrinking steadily in recent years. The divisor used to calculate the Dow has been shrinking steadily in recent years to account for arbitrary events such as stock splits and changes in the composition of the roster.
