Choose wisely. There is only one correct answer to each question.
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1.
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.
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.
If a news event leads to a drop in a stock's price, what should you as an investor do in response?
See whether the event is relevant to your stocks. Sometimes the markets' reactions to the headlines are warranted, and sometimes they are not. But are they relevant to your stocks?
4.
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.
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.
