A stock transaction that allows an investor to make money on a stock expected to fall in value. This transaction involves the immediate sale of shares not owned by the seller, who expects to buy them back later at a lower price.Group of answer choicesNone of these; investors only make money when stocks increase in value.mutual fundshort sellingstock splitIPO
Question
A stock transaction that allows an investor to make money on a stock expected to fall in value. This transaction involves the immediate sale of shares not owned by the seller, who expects to buy them back later at a lower price.Group of answer choicesNone of these; investors only make money when stocks increase in value.mutual fundshort sellingstock splitIPO
Solution
The correct answer is "short selling". This is a strategy where an investor sells stocks they do not currently own, with the expectation that the stock price will decrease in the future. They plan to buy the stock back at this lower price, thus making a profit from the difference.
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Similar to a stock split, a stock also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders. (Enter one word per blank.)
How can someone make money from investing in a stock?*1 pointThey sell the stock for a lower price than what they bought it for.They receive dividends from the company they bought the stock of and/or they sell the stock at a higher price than what they bought it for.The stock loses value but the overall market experiences a positive return.They sell the stock for the same price they bought it for.
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What do we mean by the term financial transactions?
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