Question 1

The PE ratio approach to valuing stock is especially useful for valuing

Accepted Answer

A)  privately held firms.
B)  firms that don't pay dividends.
C)  both A and B of the above.
D)  neither A nor B of the above. C

Question 2

The most active stock exchange in the world is the

Accepted Answer

A)  Nikkei Stock Exchange.
B)  London Stock Exchange.
C)  Shanghai Stock Exchange.
D)  New York Stock Exchange. A

Question 3

The riskiest capital market security is

Accepted Answer

A)  preferred stock.
B)  common stock.
C)  corporate bonds.
D)  Treasury bonds.

Question 4

To list on the NYSE, a firm must

Accepted Answer

A)  have earnings of at least $10 million per year.
B)  have at least $500 million in outstanding debt.
C)  have a total of $100 million in market value.
D)  meet all of the above requirements.
E)  meet A and C of the above requirements.

Question 5

In 2010, the NYSE traded ________ shares on an average trading day.

Accepted Answer

A)  4 billion
B)  7 billion
C)  10 billion
D)  12 billion

Question 6

The PE ratio approach to valuing stock is especially useful for valuing

Accepted Answer

A)  publicly held corporations.
B)  firms that regularly pay dividends.
C)  both A and B of the above.
D)  neither A nor B of the above.

Question 7

Preferred stockholders hold a claim on assets that has priority over the claims of

Accepted Answer

A)  both common stockholders and bondholders.
B)  neither common stockholders nor bondholders.
C)  common stockholders, but after that of bondholders.
D)  bondholders, but after that of common stockholders.

Question 8

Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is

Accepted Answer

A)  20%.
B)  15%.
C)  10%.
D)  5%.

Question 9

In over-the-counter markets, dealers increase the liquidity of thinly traded securities.

Accepted Answer

A) True 
 B)False

Question 10

The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to

Accepted Answer

A)  an increase in required returns on equity investments.
B)  a decline in growth prospects for U.S. companies.
C)  Both A and B are likely reasons.
D)  None of the above are correct.

Question 11

(I) A share of common stock in a firm represents an ownership interest in that firm. (II) A share of preferred stock is as much like a bond as it is like common stock.

Accepted Answer

A)  (I) is true, (II) false.
B)  (I) is false, (II) true.
C)  Both are true.
D)  Both are false.

Question 12

Which of the following is not an element of the Gordon growth model of stock valuation?

Accepted Answer

A)  the stock's most recent dividend paid
B)  the expected constant growth rate of dividends
C)  the required return on investments in equity
D)  the stock's expected future price

Question 13

Electronic Communications Networks apply technology to make organized exchanges more efficient and speedy.

Accepted Answer

A) True 
 B)False

Question 14

The Securities and Exchange Commission requires firms to submit various documents to increase the flow of information to investors but does not verify the accuracy of that information.

Accepted Answer

A) True 
 B)False

Question 15

What are American Depository Receipts (ADRs)?

Accepted Answer

The answer of What are American Depository Receipts (ADRs)?...

Question 16

The Wall Street Journal reports on 23 different indexes in its "Markets Lineup" column.

Accepted Answer

A) True 
 B)False

Question 17

How do corporate stocks differ from bonds?

Accepted Answer

not answered

Question 18

Which of the following statements is false regarding Electronic Communications Networks (ECNs) ?

Accepted Answer

A)  Archipelago and Instinet are two examples of ECNs.
B)  Competition from ECNs has forced NASDAQ to cut its fees.
C)  Traders benefit from lower trading costs and faster service.
D)  ECNs allow institutional investors, but not individuals, to trade after hours.

Question 19

Holding other things constant, a stock's value will be highest if its dividend growth rate is

Accepted Answer

A)  15%.
B)  10%.
C)  5%.
D)  2%.

Question 20

(I) The market price of a security at a given time is the highest value any investor puts on the security. (II) Superior information about a security increases its value by reducing its risk.

Accepted Answer

A)  (I) is true, (II) is false.
B)  (I) is false, (II) is true.
C)  Both are true.
D)  Both are false.

Exam 13: The Stock Market

The PE ratio approach to valuing stock is especially useful for valuing

Correct AnswerverifiedC

The most active stock exchange in the world is the

Correct AnswerverifiedA

The riskiest capital market security is

Correct AnswerverifiedShow Answer

To list on the NYSE, a firm must

Correct AnswerverifiedShow Answer

In 2010, the NYSE traded ________ shares on an average trading day.

Correct AnswerverifiedShow Answer

The PE ratio approach to valuing stock is especially useful for valuing

Correct AnswerverifiedShow Answer

Preferred stockholders hold a claim on assets that has priority over the claims of

Correct AnswerverifiedShow Answer

Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is

Correct AnswerverifiedShow Answer

In over-the-counter markets, dealers increase the liquidity of thinly traded securities.

Correct AnswerverifiedShow Answer

The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to

Correct AnswerverifiedShow Answer

(I) A share of common stock in a firm represents an ownership interest in that firm. (II) A share of preferred stock is as much like a bond as it is like common stock.

Correct AnswerverifiedShow Answer

Which of the following is not an element of the Gordon growth model of stock valuation?

Correct AnswerverifiedShow Answer

Electronic Communications Networks apply technology to make organized exchanges more efficient and speedy.

Correct AnswerverifiedShow Answer

The Securities and Exchange Commission requires firms to submit various documents to increase the flow of information to investors but does not verify the accuracy of that information.

Correct AnswerverifiedShow Answer

What are American Depository Receipts (ADRs)?

Correct AnswerverifiedShow Answer

The Wall Street Journal reports on 23 different indexes in its "Markets Lineup" column.

Correct AnswerverifiedShow Answer

How do corporate stocks differ from bonds?

Correct Answerverifiednot answered

Which of the following statements is false regarding Electronic Communications Networks (ECNs) ?

Correct AnswerverifiedShow Answer

Holding other things constant, a stock's value will be highest if its dividend growth rate is

Correct AnswerverifiedShow Answer

(I) The market price of a security at a given time is the highest value any investor puts on the security. (II) Superior information about a security increases its value by reducing its risk.

Correct AnswerverifiedShow Answer

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