Question 1

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

Accepted Answer

A)   Proxy
B)   Stated value
C)   Inside
D)   Secondary
E)   PrimaryF) B) and C)
G) A) and E)

Question 2

Dry Dock Marina is expected to pay an annual dividend of $1.58 next year. The stock is selling for $18.53 a share and has a total return of 9.48 percent. What is the dividend growth rate?

Accepted Answer

A)   .82 percent
B)   .03 percent
C)   1.28 percent
D)   .95 percent
E)   .66 percentF) A) and D)
G) A) and E)

Question 3

The required return on Mountain Brook stock is 13.8 percent and the dividend growth rate is 3.64 percent. The stock is currently selling for $32.80 a share. What is the dividend yield?

Accepted Answer

A)   10.16 percent
B)   8.93 percent
C)   11.75 percent
D)   10.50 percent
E)   13.36 percentF) C) and D)
G) All of the above

Question 4

Any person who owns a license to trade on the NYSE is called a:

Accepted Answer

A)   dealer.
B)   floor trader.
C)   DMM.
D)   member.
E)   proxy.F) All of the above
G) C) and D)

Question 5

Atlas Home Supply has paid a constant annual dividend of $2.40 a share for the past 15 years. Yesterday, the firm announced the dividend will increase next year by 10 percent and will stay at that level through Year 3, after which time the dividends will increase by 2 percent annually. The required return on this stock is 12 percent. What is the current value per share?

Accepted Answer

A)   $25.51
B)   $26.08
C)   $24.57
D)   $26.02
E)   $26.84F) B) and D)
G) B) and E)

Question 6

A firm has four open positions on its board of directors. How many shares do you need to own to guarantee your own election to the board if the firm has 387,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.

Accepted Answer

A)   33,334 shares
B)   77,501 shares
C)   75,251 shares
D)   70,501 shares
E)   96,876 sharesF) A) and D)
G) None of the above

Question 7

Inside quotes are defined as the:

Accepted Answer

A)   bid and asked prices presented by NYSE DMMs.
B)   last bid and asked price offered prior to the market close.
C)   lowest asked and highest bid offers.
D)   daily opening bid and asked quotes.
E)   last traded bid and asked prices.F) A) and C)
G) A) and B)

Question 8

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

Accepted Answer

A)   (P0/D1)  - g
B)   (D1/P0) /g
C)   Dividend yield + Capital gains yield
D)   Dividend yield - Capital gains yield
E)   Dividend yield × Capital gains yieldF) B) and E)
G) A) and B)

Question 9

The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently paid an annual dividend of $2.38. What is the capital gains rate if the company maintains a constant dividend?

Accepted Answer

A)   8.34 percent
B)   16.56 percent
C)   11.17 percent
D)   6.68 percent
E)   4.59 percentF) C) and D)
G) A) and E)

Question 10

Gamma Corp. is expected to pay the following dividends over the next four years: $7.50, $8.25, $15, and $1.80. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return is 14 percent, what is the current share price?

Accepted Answer

A)   $35.20
B)   $31.06
C)   $38.18
D)   $32.30
E)   $34.90F) C) and D)
G) A) and C)

Question 11

For the past six years, the price of Slippery Rock stock has been increasing at a rate of 8.21 percent a year. Currently, the stock is priced at $43.40 a share and has a required return of 11.65 percent. What is the dividend yield?

Accepted Answer

A)   3.20 percent
B)   2.75 percent
C)   3.69 percent
D)   4.28 percent
E)   3.44 percentF) A) and E)
G) B) and E)

Question 12

Companies can list their stock on which one of the following without having to meet listing requirements or filing financial statements with the SEC?

Accepted Answer

A)   NASDAQ Capital Market
B)   Over-the-Counter Bulletin Board
C)   Pink sheets
D)   NASDAQ Global Market
E)   NYSEF) B) and E)
G) C) and D)

Question 13

Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent. What is the amount of the last dividend this company paid?

Accepted Answer

A)   $1.05
B)   $1.55
C)   $1.60
D)   $1.15
E)   $1.30F) All of the above
G) None of the above

Question 14

If a trade is made "in the crowd," the trade has occurred:

Accepted Answer

A)   between a broker and a DMM.
B)   between two brokers.
C)   electronically on NASDAQ.
D)   onSuperDOT.
E)   on an ECN.F) B) and C)
G) C) and E)

Question 15

The next dividend payment by S&S will be $1.38 per share. The dividends are anticipated to maintain a 2.5 percent growth rate, forever. If the stock currently sells for $26.90 per share, what is the required return?

Accepted Answer

A)   8.03 percent
B)   7.82 percent
C)   7.63 percent
D)   8.74 percent
E)   9.02 percentF) B) and E)
G) C) and D)

Question 16

Toy Mart recently announced that it will pay annual dividends at the end of the next two years of $1.60 and $1.10 per share, respectively. Then, in Year 5 it plans to pay a final dividend of $13.50 a share before closing its doors
Permanently. At a required return of 13.5 percent, what should this stock sell for today?

Accepted Answer

A)   $3.24
B)   $16.20
C)   $9.43
D)   $13.33
E)   $12.70F) A) and B)
G) A) and C)

Question 17

A DMM is a(n) :

Accepted Answer

A)   employee who executes orders to buy and sell for clients of his or her brokerage firm.
B)   individual who trades on the floor of an exchange for his or her personal account.
C)   NYSE member who functions as a dealer for a limited number of securities.
D)   broker who buys and sells securities from a market maker.
E)   trader who deals only with primary offerings.F) All of the above
G) B) and E)

Question 18

The Impulse Shopper recently paid an annual dividend of $1.13 per share. The company just announced that it is suspending all dividend payments on its common stock for the next five years. After that, the company expects to pay $.50 a share at the end of each year. At a required return of 18 percent, what is this stock worth today?

Accepted Answer

A)   $0
B)   $1.13
C)   $2.78
D)   $1.03
E)   $1.21F) A) and E)
G) D) and E)

Question 19

There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _____ voting.

Accepted Answer

A)   simultaneous
B)   straight
C)   proxy
D)   cumulative
E)   sequentialF) A) and B)
G) B) and D)

Question 20

Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $.86 a share but all future dividends will be decreased by 3.5 percent annually. What is a share of this stock worth today at a required return of 17.8 percent?

Accepted Answer

A)   $3.06
B)   $3.90
C)   $3.41
D)   $3.59
E)   $3.95F) A) and B)
G) A) and E)

Exam 7: Equity Markets and Stock Valuation

Correct Answer
verified

The required return on Mountain Brook stock is 13.8 percent and the dividend growth rate is 3.64 percent. The stock is currently selling for $32.80 a share. What is the dividend yield?

Correct Answer
verified

Correct Answer
verified

Gamma Corp. is expected to pay the following dividends over the next four years: $7.50, $8.25, $15, and $1.80. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return is 14 percent, what is the current share price?

Correct Answer
verified

For the past six years, the price of Slippery Rock stock has been increasing at a rate of 8.21 percent a year. Currently, the stock is priced at $43.40 a share and has a required return of 11.65 percent. What is the dividend yield?

Correct Answer
verified

Companies can list their stock on which one of the following without having to meet listing requirements or filing financial statements with the SEC?

Correct Answer
verified

There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _____ voting.

Correct Answer
verified

The next dividend payment by S&S will be $1.38 per share. The dividends are anticipated to maintain a 2.5 percent growth rate, forever. If the stock currently sells for $26.90 per share, what is the required return?

Correct Answer
verified

A DMM is a(n) :

Correct Answer
verified

Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent. What is the amount of the last dividend this company paid?

Correct Answer
verified

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

Correct Answer
verified

A firm has four open positions on its board of directors. How many shares do you need to own to guarantee your own election to the board if the firm has 387,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Any person who owns a license to trade on the NYSE is called a:

Correct Answer
verified

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

Correct Answer
verified

Dry Dock Marina is expected to pay an annual dividend of $1.58 next year. The stock is selling for $18.53 a share and has a total return of 9.48 percent. What is the dividend growth rate?

Correct Answer
verified

Inside quotes are defined as the:

Correct Answer
verified

The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently paid an annual dividend of $2.38. What is the capital gains rate if the company maintains a constant dividend?

Correct Answer
verified

If a trade is made "in the crowd," the trade has occurred:

Correct Answer
verified

Exam 7: Equity Markets and Stock Valuation

Correct AnswerverifiedShow Answer

The required return on Mountain Brook stock is 13.8 percent and the dividend growth rate is 3.64 percent. The stock is currently selling for $32.80 a share. What is the dividend yield?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Gamma Corp. is expected to pay the following dividends over the next four years: $7.50, $8.25, $15, and $1.80. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return is 14 percent, what is the current share price?

Correct AnswerverifiedShow Answer

For the past six years, the price of Slippery Rock stock has been increasing at a rate of 8.21 percent a year. Currently, the stock is priced at $43.40 a share and has a required return of 11.65 percent. What is the dividend yield?

Correct AnswerverifiedShow Answer

Companies can list their stock on which one of the following without having to meet listing requirements or filing financial statements with the SEC?

Correct AnswerverifiedShow Answer

There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _____ voting.

Correct AnswerverifiedShow Answer

The next dividend payment by S&S will be $1.38 per share. The dividends are anticipated to maintain a 2.5 percent growth rate, forever. If the stock currently sells for $26.90 per share, what is the required return?

Correct AnswerverifiedShow Answer

A DMM is a(n) :

Correct AnswerverifiedShow Answer

Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent. What is the amount of the last dividend this company paid?

Correct AnswerverifiedShow Answer

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

Correct AnswerverifiedShow Answer

A firm has four open positions on its board of directors. How many shares do you need to own to guarantee your own election to the board if the firm has 387,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Any person who owns a license to trade on the NYSE is called a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Dry Dock Marina is expected to pay an annual dividend of $1.58 next year. The stock is selling for $18.53 a share and has a total return of 9.48 percent. What is the dividend growth rate?

Correct AnswerverifiedShow Answer

Inside quotes are defined as the:

Correct AnswerverifiedShow Answer

The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently paid an annual dividend of $2.38. What is the capital gains rate if the company maintains a constant dividend?

Correct AnswerverifiedShow Answer

If a trade is made "in the crowd," the trade has occurred:

Correct AnswerverifiedShow Answer

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