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1.
When astute investors see a particular news event influencing a stock's price to drop even though the company's fundamentals are still sound, what are they likely to consider doing?
Buying the stock. In this case, if the fundamentals are strong, this is a classic buying opportunity.
2.
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.
3.
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.
4.
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.
5.
What is an "earnings surprise"?
When a company's actual earnings results differ from what Wall Street's analysts expect. The actual earnings may be higher or lower. As a result, the company's stock price may rise or fall.
