Question 1

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

Accepted Answer

A)  broker.
B)  floor trader.
C)  capitalist.
D)  principal.
E)  dealer.F) A) and C)
G) A) and E)

Question 2

You are the sole shareholder of a small corporation.Presently,you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets,if any,might be conducive to this sale?

Accepted Answer

A)  NASDAQ
B)  OTCBB
C)  Pink Sheets
D)  NYSEE) A) and B)
F) A) and D)

Question 3

Beatrice Markets is expecting a period of intense growth and has decided to retain more of its earnings to help finance that growth.As a result,it is going to reduce its annual dividend by 30 percent a year for the next 2 years.After that,it will maintain a constant dividend of $2.50 a share.Last year,the company paid $3.60 as the annual dividend per share.What is the market value of this stock if the required rate of return is 14.5 percent?

Accepted Answer

A)  $14.63
B)  $16.70
C)  $18.08
D)  $19.61
E)  $21.23F) C) and E)
G) B) and D)

Question 4

Diets For You announced today that it will begin paying annual dividends next year.The first dividend will be $0.12 a share.The following dividends will be $0.15,$0.20,$0.50,and $0.75 a share annually for the following 4 years,respectively.After that,dividends are projected to increase by 4 percent per year.How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?

Accepted Answer

A)  $11.67
B)  $11.94
C)  $12.78
D)  $13.50
E)  $13.86F) A) and E)
G) A) and B) C

Question 5

Bechtel Machinery stock currently sells for $65 per share.The market requires a 14 percent return on the firm's stock.The company maintains a constant 8 percent growth rate in dividends.What was the most recent annual dividend per share paid on this stock?

Accepted Answer

A)  $3.00
B)  $3.61
C)  $3.67
D)  $3.75
E)  $3.91F) A) and C)
G) A) and B)

Question 6

Which one of the following statements related to corporate dividends is correct?

Accepted Answer

A)  Dividends are nontaxable income to shareholders.
B)  Dividends reduce the taxable income of the corporation.
C)  The Chief Executive Officer of a corporation is responsible for declaring dividends.
D)  The Chief Financial Officer of a corporation determines the amount of dividend to be paid.
E)  Corporate shareholders may receive a tax break on a portion of their dividend income.F) B) and D)
G) A) and B)

Question 7

Yesteryear Productions pays no dividend at the present time.The company plans to start paying an annual dividend in the amount of $0.40 a share for two years commencing four years from today.After that time,the company plans on paying a constant $0.75 a share annual dividend indefinitely.How much are you willing to pay to buy a share of this stock today if your required return is 11.6 percent?

Accepted Answer

A)  $3.78
B)  $4.22
C)  $4.37
D)  $4.71
E)  $4.98F) A) and B)
G) A) and C)

Question 8

Callander Enterprises stock is listed on NASDAQ.The firm is planning to issue some new equity shares for sale to the general public.This sale will occur in which one of the following markets?

Accepted Answer

A)  private
B)  auction
C)  exchange floor
D)  secondary
E)  primaryF) A) and C)
G) C) and D)

Question 9

What are the primary differences and similarities between NASDAQ and the NYSE?

Accepted Answer

The NYSE has a physical trading floor in...

Question 10

The secondary market is best defined by which one of the following?

Accepted Answer

A)  market in which subordinated shares are issued and resold
B)  market conducted solely by brokers
C)  market dominated by dealers
D)  market where outstanding shares of stock are resold
E)  market where warrants are offered and soldF) C) and D)
G) C) and E)

Question 11

Which of the following features do preferred shareholders and bondholders frequently have in common?
I.lack of voting rights
II.conversion option into common stock
III.annuity payments
IV.fixed liquidation value

Accepted Answer

A)  I and II only
B)  III and IV only
C)  II, III, and IV only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and B)
G) D) and E)

Question 12

Sessler Manufacturers made two announcements concerning its common stock today.First,the company announced that the next annual dividend will be $1.75 a share.Secondly,all dividends after that will decrease by 1.5 percent annually.What is the maximum amount you should pay to purchase a share of this stock today if you require a 14 percent rate of return?

Accepted Answer

A)  $11.29
B)  $12.64
C)  $13.27
D)  $14.00
E)  $14.21F) D) and E)
G) A) and B)

Question 13

The dividend growth model:
I.assumes that dividends increase at a constant rate forever.
II.can be used to compute a stock price at any point in time.
III.can be used to value zero-growth stocks.
IV.requires the growth rate to be less than the required return.

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, III, and IV only
D)  I, II, and IV only
E)  I, II, III, and IVF) A) and B)
G) All of the above

Question 14

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Accepted Answer

A)  13.88 percent
B)  14.03 percent
C)  14.21 percent
D)  14.37 percent
E)  14.60 percentF) C) and D)
G) A) and C) E

Question 15

Springboro Tech is a young start-up company.No dividends will be paid on the stock over the next 15 years,because the firm needs to plow back its earnings to fuel growth.The company will pay a $15 per share dividend in 16 years and will increase the dividend by 4 percent per year thereafter.What is the current share price if the required return on this stock is 8 percent?

Accepted Answer

A)  $118.22
B)  $119.19
C)  $120.00
D)  $164.59
E)  $240.00F) B) and E)
G) All of the above

Question 16

An increase in which of the following will increase the current value of a stock according to the dividend growth model?
I.dividend amount
II.number of future dividends,provided the current number is less than infinite
III.discount rate
IV.dividend growth rate

Accepted Answer

A)  I and II only
B)  III and IV only
C)  I, II, and III only
D)  I, II, and IV only
E)  I, II, III, and IVF) C) and D)
G) A) and D) D

Question 17

Which one of the following transactions occurs in the primary market?

Accepted Answer

A)  purchase of 500 shares of GE stock from a current shareholder
B)  gift of 100 shares of stock to a charitable organization
C)  gift of 200 shares of stock by a mother to her daughter
D)  a purchase of newly issued stock from AT&T
E)  IBM's purchase of GE stockF) B) and E)
G) B) and D)

Question 18

Zylo,Inc.preferred stock pays a $7.50 annual dividend.What is the maximum price you are willing to pay for one share of this stock today if your required return is 7.5 percent?

Accepted Answer

A)  $32.26
B)  $35.48
C)  $72.68
D)  $100.00
E)  $107.50F) C) and E)
G) A) and E)

Question 19

Electronics,Inc.common stock returned a nifty 23.5 percent rate of return last year.The dividend amount was $0.25 a share which equated to a dividend yield of 0.95 percent.What was the rate of price appreciation for the year?

Accepted Answer

A)  22.55 percent
B)  23.38 percent
C)  23.60 percent
D)  23.87 percent
E)  23.52 percentF) B) and E)
G) A) and B)

Question 20

Which one of the following statements applies to NASDAQ?

Accepted Answer

A)  a partner with the London exchange
B)  exchange floor is located in Chicago
C)  single market maker for each listed security
D)  broker's market
E)  comprised of three separate marketsF) A) and D)
G) C) and E)

Exam 8: Stock Valuation

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

Correct Answer
verified

You are the sole shareholder of a small corporation.Presently,you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets,if any,might be conducive to this sale?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Bechtel Machinery stock currently sells for $65 per share.The market requires a 14 percent return on the firm's stock.The company maintains a constant 8 percent growth rate in dividends.What was the most recent annual dividend per share paid on this stock?

Correct Answer
verified

Which one of the following statements related to corporate dividends is correct?

Correct Answer
verified

Correct Answer
verified

Callander Enterprises stock is listed on NASDAQ.The firm is planning to issue some new equity shares for sale to the general public.This sale will occur in which one of the following markets?

Correct Answer
verified

What are the primary differences and similarities between NASDAQ and the NYSE?

Correct Answer
verified
The NYSE has a physical trading floor in...
View Answer

The secondary market is best defined by which one of the following?

Correct Answer
verified

Which of the following features do preferred shareholders and bondholders frequently have in common? I.lack of voting rights II.conversion option into common stock III.annuity payments IV.fixed liquidation value

Correct Answer
verified

Correct Answer
verified

The dividend growth model: I.assumes that dividends increase at a constant rate forever. II.can be used to compute a stock price at any point in time. III.can be used to value zero-growth stocks. IV.requires the growth rate to be less than the required return.

Correct Answer
verified

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Correct Answer
verified
E

Correct Answer
verified

An increase in which of the following will increase the current value of a stock according to the dividend growth model? I.dividend amount II.number of future dividends,provided the current number is less than infinite III.discount rate IV.dividend growth rate

Correct Answer
verified
D

Which one of the following transactions occurs in the primary market?

Correct Answer
verified

Zylo,Inc.preferred stock pays a $7.50 annual dividend.What is the maximum price you are willing to pay for one share of this stock today if your required return is 7.5 percent?

Correct Answer
verified

Electronics,Inc.common stock returned a nifty 23.5 percent rate of return last year.The dividend amount was $0.25 a share which equated to a dividend yield of 0.95 percent.What was the rate of price appreciation for the year?

Correct Answer
verified

Which one of the following statements applies to NASDAQ?

Correct Answer
verified

Exam 8: Stock Valuation

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

Correct AnswerverifiedShow Answer

You are the sole shareholder of a small corporation.Presently,you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets,if any,might be conducive to this sale?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

Bechtel Machinery stock currently sells for $65 per share.The market requires a 14 percent return on the firm's stock.The company maintains a constant 8 percent growth rate in dividends.What was the most recent annual dividend per share paid on this stock?

Correct AnswerverifiedShow Answer

Which one of the following statements related to corporate dividends is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Callander Enterprises stock is listed on NASDAQ.The firm is planning to issue some new equity shares for sale to the general public.This sale will occur in which one of the following markets?

Correct AnswerverifiedShow Answer

What are the primary differences and similarities between NASDAQ and the NYSE?

Correct AnswerverifiedThe NYSE has a physical trading floor in...View AnswerShow Answer

The secondary market is best defined by which one of the following?

Correct AnswerverifiedShow Answer

Which of the following features do preferred shareholders and bondholders frequently have in common? I.lack of voting rights II.conversion option into common stock III.annuity payments IV.fixed liquidation value

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The dividend growth model: I.assumes that dividends increase at a constant rate forever. II.can be used to compute a stock price at any point in time. III.can be used to value zero-growth stocks. IV.requires the growth rate to be less than the required return.

Correct AnswerverifiedShow Answer

Northern Gas recently paid a $2.80 annual dividend on its common stock.This dividend increases at an average rate of 3.8 percent per year.The stock is currently selling for $26.91 a share.What is the market rate of return?

Correct AnswerverifiedE

Correct AnswerverifiedShow Answer

An increase in which of the following will increase the current value of a stock according to the dividend growth model? I.dividend amount II.number of future dividends,provided the current number is less than infinite III.discount rate IV.dividend growth rate

Correct AnswerverifiedD

Which one of the following transactions occurs in the primary market?

Correct AnswerverifiedShow Answer

Zylo,Inc.preferred stock pays a $7.50 annual dividend.What is the maximum price you are willing to pay for one share of this stock today if your required return is 7.5 percent?

Correct AnswerverifiedShow Answer

Electronics,Inc.common stock returned a nifty 23.5 percent rate of return last year.The dividend amount was $0.25 a share which equated to a dividend yield of 0.95 percent.What was the rate of price appreciation for the year?

Correct AnswerverifiedShow Answer

Which one of the following statements applies to NASDAQ?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The NYSE has a physical trading floor in...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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E

Correct Answer
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Correct Answer
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D

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Correct Answer
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