Stocks Beginner: Using Financial Services Wisely

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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?
Choose wisely. There is only one correct answer.
None of the above. All of these are ways that planners and advisors get paid.
2.
Shorting stock involves _______.
Choose wisely. There is only one correct answer.
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.
3.
Sometimes, the more you trade, the lower your per-trade commissions.
Choose wisely. There is only one correct answer.
True. Some brokers reward "active traders," as they are called, with lower per-trade commissions, provided that the traders meet a certain minimum number of trades per time period.
4.
Buying an investment on margin means _______.
Choose wisely. There is only one correct answer.
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.
5.
What is the conflict of interest that you might encounter with a full-service broker who earns commissions?
Choose wisely. There is only one correct answer.
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.
6.
If you place a market order to buy 100 shares of fictional company Wolverines Sailboats Corp., at what price and when would the trade be executed?
Choose wisely. There is only one correct answer.
The trade would be executed immediately at the best available price. A market order tells the broker to buy or sell at the best price available, and the trades are usually executed immediately, assuming the market is open.