Choose wisely. There is only one correct answer to each question.
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1.
Financial planners and advisors get paid in one of three possible ways. Which of the following is not one of those ways?
None of the above. All of these are ways that planners and advisors get paid.
2.
If you choose a discount broker over a full-service broker, you may have to sacrifice certain services. Which of the following is not one of those services that might be sacrificed?
Trades. Trades are the one service that all brokers will offer, or else they would not be brokers at all. The other services are more likely to be offered by the full-service brokers.
3.
If you place an order with your broker to buy a stock provided that the price does not exceed $40 per share, you have placed a _______.
Limit order. A limit order limits the price at which the trade is being executed.
4.
What is the conflict of interest that you might encounter with a full-service broker who earns commissions?
The broker may encourage frequent trading in order to get more commissions. While the other choices might still occur, only this one is a conflict of interest. Make sure your broker has your best interests at heart.
5.
Shorting stock involves _______.
Borrowing shares of stock, selling them, and intending to buy them back at a lower price. With shorting, you can actually profit when a stock drops in price.
6.
Buying an investment on margin means _______.
Borrowing money from another to purchase it. Buying on margin involves borrowing money, usually from a broker, to purchase an investment and then returning the money along with a commission.