Money Smarts Quiz Answer (1b)

b. you have lent money to the company.

The correct answer is: a. you own a part of the company.

When you own stock, you own a part of the company. There are no guarantees of profits, or even that you will get your original investment back, but you might make money in two ways. First, the price of the stock can rise if the company does well and other investors want to buy the stock. If a stock's price rises from $10 to $12, the $2 increase is called a capital gain or appreciation. Second, a company sometimes pays out a part of its profits to stockholders – that's called a dividend. If the company doesn't do well, or falls out of favor with investors, your stock can fall in price and the company can stop paying dividends, or make them smaller.

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Question 1, Answer b