On a stock exchange, the 'bid price' is $49.90 and the 'ask price' is $50.10. What does this bid-ask spread of $0.20 represent?
AThe minimum amount by which the stock price can change in a single trade, also known as the tick size
BThe daily price change of the stock, indicating it has moved $0.20 since the market opened
CThe difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept — it represents a transaction cost to investors and a source of revenue for market makers who bridge the gap
DA regulatory fee imposed by the exchange on every trade, collected and shared equally between the buyer and the seller
A company announces a cash dividend of $2.00 per share with an ex-dividend date of March 15. An investor buys shares on March 15 itself. Will they receive this dividend?
AYes — the ex-dividend date is the last day to buy shares and still receive the dividend, so purchasing on March 15 qualifies the investor
BNo — the ex-dividend date is the first day the stock trades without the right to the declared dividend, so buyers on or after March 15 do not receive it; only shareholders who held the stock before that date (the 'record date' holders) are entitled to the payment
CIt depends on whether the investor uses a market order or a limit order — market orders receive dividends but limit orders do not
DYes, but the investor receives only half the dividend amount because they bought on the boundary date rather than before it
An investor places a stop-loss order at $45 for a stock currently trading at $50. The next morning, the stock opens at $42 following overnight bad news, with no trades occurring between $45 and $42. What most likely happens to the stop-loss order?
AThe stop-loss order remains pending and will not trigger until the stock trades back up to $45, because stop orders only activate on upward price crossings
BThe stop-loss order executes at exactly $45 because the exchange is required to fill it at the specified price regardless of where the market opens
CThe stop-loss order is automatically cancelled by the exchange because the stock gapped past the stop price without trading through it
DThe stop-loss order triggers at the open and converts to a market order, executing at or near $42 — not $45 — because a stop-loss guarantees activation at the stop price but not execution at that price, and a gap-down can cause the fill to be significantly below the stop