Question 1

Which one of the following types of securities has no priority in a bankruptcy proceeding?

Accepted Answer

A)  ordinary Shares
B)  senior debt
C)  straight bond
D)  preferred stock
E)  convertible bondF) A) and B)
G) A) and D)

Question 2

Palm Beach Beachwear has ordinary shares that are listed on the ASX and have just paid a dividend of $1.25.They have announced that next year's dividend will be increased to $1.50 but that this dividend will not change in the foreseeable future.Current investors have indicated that they expect a return of 12 per cent.Based on this information,at what price would you expect the share to trade at immediately after this announcement?

Accepted Answer

A)  $12.50
B)  $10.41
C)  $21.50
D)  $10.00
E)  $10.50F) A) and B)
G) A) and C)

Question 3

Delfino's expects to pay an annual dividend of $1.50 per share next year.What is the anticipated dividend for year 5 if the firm increases its dividend by 2 per cent annually?

Accepted Answer

A)  $1.50 ´ (1.02) 4
B)  $1.50 ´ (1.02) 2
C)  $1.50 ´ (1.02) 3
D)  $1.50 ´ (1.02) 
E)  $1.50 ´ (1.02) 1F) B) and C)
G) A) and C)

Question 4

Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Accepted Answer

A)  stock with irregular dividends
B)  stock with growing dividends for a limited period of time
C)  non-dividend-paying stock
D)  stock with a constant growth dividend
E)  stock with a constant dividendF) C) and E)
G) A) and D)

Question 5

A dealer is an agent who:

Accepted Answer

A)  buys and sells securities but never takes title to the securities
B)  transacts buy and sell orders on a commission basis
C)  arranges transactions on a fee basis
D)  trades solely on behalf of a floor broker
E)  buys and sells securities from inventoryF) B) and E)
G) D) and E)

Question 6

What is true about a preference share?

Accepted Answer

A)  All of the given answers are true.
B)  Holders of the preference shares usually have no voting rights.
C)  The preference share is a form of equity from a legal standpoint.
D)  Unpaid preference share dividends are not debts of the company.
E)  The preference share has preference over ordinary shares in the payment of dividends.F) A) and E)
G) C) and D)

Question 7

Keller Metal's common stock is selling for $36 a share and has a dividend yield of 3.2 per cent.What is the dividend amount?

Accepted Answer

A)  $0.32
B)  $11.52
C)  $3.49
D)  $1.15
E)  $11.25F) A) and B)
G) A) and C)

Question 8

Newly issued securities are sold to investors in which one of the following markets?

Accepted Answer

A)  primary
B)  stated value
C)  inside
D)  secondary
E)  proxyF) A) and B)
G) B) and E)

Question 9

The common stock of Wetmore Industries is valued at $10.08 a share.The company increases their dividend by 3.5 per cent annually and expects their next dividend to be $1.24.What is the required rate of return on this stock?

Accepted Answer

A)  16.23 per cent
B)  16.53 per cent
C)  16.35 per cent
D)  16.49 per cent
E)  15.80 per centF) B) and D)
G) C) and D)

Question 10

Ordinary shareholders have all the following rights except:

Accepted Answer

A)  the right to priority in the event of company liquidation
B)  the right to share proportionally in dividends paid
C)  the right to share proportionally in assets remaining after liabilities have been paid in a company liquidation
D)  the right to vote on matters of great importance as set out in the constitution of the company
E)  the right to elect directorsF) D) and E)
G) C) and E)

Exam 7: Equity Markets and Stock Valuation

A dealer is an agent who:

Correct Answer
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Which one of the following types of securities has no priority in a bankruptcy proceeding?

Correct Answer
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Keller Metal's common stock is selling for $36 a share and has a dividend yield of 3.2 per cent.What is the dividend amount?

Correct Answer
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Correct Answer
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Delfino's expects to pay an annual dividend of $1.50 per share next year.What is the anticipated dividend for year 5 if the firm increases its dividend by 2 per cent annually?

Correct Answer
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The common stock of Wetmore Industries is valued at $10.08 a share.The company increases their dividend by 3.5 per cent annually and expects their next dividend to be $1.24.What is the required rate of return on this stock?

Correct Answer
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What is true about a preference share?

Correct Answer
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Ordinary shareholders have all the following rights except:

Correct Answer
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Newly issued securities are sold to investors in which one of the following markets?

Correct Answer
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Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Correct Answer
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Exam 7: Equity Markets and Stock Valuation

A dealer is an agent who:

Correct AnswerverifiedShow Answer

Which one of the following types of securities has no priority in a bankruptcy proceeding?

Correct AnswerverifiedShow Answer

Keller Metal's common stock is selling for $36 a share and has a dividend yield of 3.2 per cent.What is the dividend amount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Delfino's expects to pay an annual dividend of $1.50 per share next year.What is the anticipated dividend for year 5 if the firm increases its dividend by 2 per cent annually?

Correct AnswerverifiedShow Answer

The common stock of Wetmore Industries is valued at $10.08 a share.The company increases their dividend by 3.5 per cent annually and expects their next dividend to be $1.24.What is the required rate of return on this stock?

Correct AnswerverifiedShow Answer

What is true about a preference share?

Correct AnswerverifiedShow Answer

Ordinary shareholders have all the following rights except:

Correct AnswerverifiedShow Answer

Newly issued securities are sold to investors in which one of the following markets?

Correct AnswerverifiedShow Answer

Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Correct AnswerverifiedShow Answer

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