Question 1

The least efficient of all the different types of secondary markets is the

Accepted Answer

A)   auction market.
B)   direct search market.
C)   dealer market.
D)   broker market.

Question 2

Which ONE of the following statements is NOT true about preferred stock?

Accepted Answer

A)   Preferred dividend payments are fixed amounts paid regularly by the firm, similar to the interest payments on corporate bonds.
B)   Preferred dividends are deductable from taxable income just like the interest on bonds.
C)   Preferred stock holders have limited voting privileges relative to common-stock owners.
D)   While preferred stock is legally classified as perpetuities, some issues do have a fixed maturity.

Question 3

Which one of the following statements is NOT true about zero-growth stocks?

Accepted Answer

A)   Dividend stays constant over time.
B)   The cash flow pattern resembles a perpetuity with a constant cash flow.
C)   Dividend payment pattern shows constant growth over time.
D)   There is no growth in dividends over time.

Question 4

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

Accepted Answer

A)   $10.76
B)   $9.80
C)   $11.88
D)   $11.50

Question 5

Which ONE of the following statements is true about secondary markets in the United States?

Accepted Answer

A)   In terms of total volume of activity and total capitalization of the firms listed, the NASDAQ is the largest in the world and the NYSE is the second largest.
B)   In terms of the number of companies listed and shares traded on a daily basis, NASDAQ is larger than the NYSE.
C)   Firms listed on the NASDAQ tend to be, on average, larger in size, and their shares trade more frequently than firms whose securities trade on NYSE.
D)   In the United States, most secondary market transactions are done over the counter.

Question 6

Whenever the dividend growth rate exceeds the required rate of return, the constant-growth model provides invalid solutions.

Accepted Answer

A) True 
 B)False

Question 7

Which one of the following statements is NOT true about auction markets?

Accepted Answer

A)   In an auction market, buyers and sellers face each other directly and bargain over price.
B)   The NASDAQ is the most efficient stockmarket in the United States.
C)   The New York Stock Exchange is the best-known example of an auction market.
D)   The auctioneer in this case is the specialist, who is designated by the exchange to represent orders placed by public customers.

Question 8

Supernormal growth: Suppose a firm's expected dividends for the next three years are as follows: D1 = $1.10, D2 = $1.20, and D3 = $1.30. After three years, the firm's dividends are expected to grow at 5.00 percent per year. What is should the current price of the firm's stock (P0)  be today if investors require a rate of return of 12.00 percent on the stock? (Round off to the nearest $0.01)

Accepted Answer

A)   $61.30
B)   $10.10
C)   $16.74
D)   $24.12

Question 9

Constant growth: Prior, Inc., is expected to grow at a constant rate of 9 percent. If the company's next dividend is $2.75 and its current price is $37.35, what is the required rate of return on this stock? (Round to the nearest percent.)

Accepted Answer

A)   13%
B)   16%
C)   20%
D)   21%

Question 10

PV of dividends: Jacobs Suppliers has not paid out any dividend in the last three years. It does not expect to pay dividends in the next two years either as it recovers from an economic slowdown. Three years from now it expects to pay a dividend of $2.50 and then $3.00 in the following two years. What is the present value of the dividends to be received over the next five years if the discount rate is 15 percent?

Accepted Answer

A)   $4.85
B)   $5.37
C)   $5.50
D)   $6.14

Question 11

Which of the following statements is true?

Accepted Answer

A)   Preferred stockholders are considered to be the true owners of public corporations.
B)   Dividends paid to preferred stockholders are not fixed.
C)   Preferred stockholders do not typically have voting rights.
D)   Preferred stock can never be converted to common stock.

Question 12

Constant growth: You are interested in investing in a company that expects to grow steadily at an annual rate of 6 percent for the foreseeable future. The firm paid a dividend of $2.30 last year. If your required rate of return is 10 percent, what is the most you would be willing to pay for this stock? (Round to the nearest dollar.)

Accepted Answer

A)   $58
B)   $61
C)   $23
D)   $24

Question 13

In terms of total volume of activity and total capitalization of the firms listed, the NYSE is the largest in the world and NASDAQ is the second largest.

Accepted Answer

A) True 
 B)False

Exam 9: Share Valuation

Which one of the following statements is NOT true about zero-growth stocks?

Correct Answer
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Whenever the dividend growth rate exceeds the required rate of return, the constant-growth model provides invalid solutions.

Correct Answer
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Constant growth: Prior, Inc., is expected to grow at a constant rate of 9 percent. If the company's next dividend is $2.75 and its current price is $37.35, what is the required rate of return on this stock? (Round to the nearest percent.)

Correct Answer
verified

The least efficient of all the different types of secondary markets is the

Correct Answer
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In terms of total volume of activity and total capitalization of the firms listed, the NYSE is the largest in the world and NASDAQ is the second largest.

Correct Answer
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Correct Answer
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Which of the following statements is true?

Correct Answer
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Which ONE of the following statements is true about secondary markets in the United States?

Correct Answer
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Which ONE of the following statements is NOT true about preferred stock?

Correct Answer
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Correct Answer
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PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

Correct Answer
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Correct Answer
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Which one of the following statements is NOT true about auction markets?

Correct Answer
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Exam 9: Share Valuation

Which one of the following statements is NOT true about zero-growth stocks?

Correct AnswerverifiedShow Answer

Whenever the dividend growth rate exceeds the required rate of return, the constant-growth model provides invalid solutions.

Correct AnswerverifiedShow Answer

Constant growth: Prior, Inc., is expected to grow at a constant rate of 9 percent. If the company's next dividend is $2.75 and its current price is $37.35, what is the required rate of return on this stock? (Round to the nearest percent.)

Correct AnswerverifiedShow Answer

The least efficient of all the different types of secondary markets is the

Correct AnswerverifiedShow Answer

In terms of total volume of activity and total capitalization of the firms listed, the NYSE is the largest in the world and NASDAQ is the second largest.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which ONE of the following statements is true about secondary markets in the United States?

Correct AnswerverifiedShow Answer

Which ONE of the following statements is NOT true about preferred stock?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

PV of dividends: Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it expects its dividend to grow at 7 percent for the next four years. What is the present value of dividends over the next five-year period if the required rate of return is 10 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements is NOT true about auction markets?

Correct AnswerverifiedShow Answer

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