Question 1

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Accepted Answer

A)   Auction
B)   Private
C)   Over-the-counter
D)   Regional
E)   InsiderF) A) and B)
G) B) and E)

Question 2

Hardy Lumber has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?

Accepted Answer

A)   Right to share in company profits prior to other shareholders
B)   Right to elect the corporate directors
C)   Right to vote on proposed mergers
D)   Right to all residual income after the common dividends have been paid
E)   Right to a permanent seat on the board of directorsF) B) and C)
G) A) and E)

Question 3

The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock?

Accepted Answer

A)   4.84 percent
B)   6.41 percent
C)   9.92 percent
D)   6.14 percent
E)   7.28 percentF) C) and D)
G) A) and E)

Question 4

Which one of the following statements applies to NASDAQ?

Accepted Answer

A)   Composed of four separate markets
B)   Exchange floor located in Chicago
C)   Provides two levels of information access
D)   Designated market maker system
E)   Multiple market maker systemF) C) and D)
G) A) and C)

Question 5

An agent who maintains an inventory from which he or she buys and sells securities is called a:

Accepted Answer

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

Question 6

JL Co. stock currently sells for $64 per share and the required return is 12 percent. The total return is evenly divided between the capital gains yield and the dividend yield. What is the current dividend per share if it's the company's policy to always maintain a constant growth rate in its dividends?

Accepted Answer

A)   $4.09
B)   $3.62
C)   $4.02
D)   $3.56
E)   $3.84F) A) and D)
G) C) and D)

Question 7

Who can access Level 3 of NASDAQ's information?

Accepted Answer

A)   Anyone with internet access
B)   Only NASDAQ regulators
C)   Customers who pay an access fee
D)   NASDAQ market makers
E)   There is no Level 3F) None of the above
G) B) and D)

Question 8

Which one of following is the rate at which a stock's price is expected to appreciate?

Accepted Answer

A)   Current yield
B)   Total return
C)   Dividend yield
D)   Capital gains yield
E)   Coupon rateF) B) and E)
G) B) and C)

Question 9

Jen owns 30 shares of stock in Delta Fashions and wants to win a seat on the board of directors. The firm has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect three new directors. Which one of the following statements must be true given this information?

Accepted Answer

A)   Regardless of the voting procedure, Jen does not own enough shares to gain a seat on the board.
B)   If straight voting applies, Jen is assured a seat on the board.
C)   If straight voting applies, Jen can control all of the open seats.
D)   If cumulative voting applies, Jen is assured one seat on the board.
E)   If cumulative voting applies, Jen can control all of the open seats.F) B) and D)
G) All of the above

Question 10

The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. What is the market rate of return if the stock is currently selling for $49.10 a share?

Accepted Answer

A)   9.63 percent
B)   9.13 percent
C)   8.46 percent
D)   9.44 percent
E)   6.83 percentF) A) and C)
G) C) and E)

Question 11

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 11.7 percent?

Accepted Answer

A)   $12.39
B)   $13.30
C)   $13.67
D)   $12.79
E)   $13.41F) B) and E)
G) B) and D)

Question 12

Hi-Tek is a young start-up company that is currently retaining all of its earnings. The company plans to pay a $2 per share dividend in Year 7 and  increase that dividend by 2.2 percent per year thereafter. What is the current share price if the required return is 16 percent?

Accepted Answer

A)   $5.95
B)   $6.62
C)   $8.59
D)   $14.29
E)   $11.78F) A) and D)
G) B) and E)

Question 13

A company has four open seats on its board of directors. There are seven candidates vying for these four positions. There will be a single election to determine the winners. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 400 of your votes for a single candidate. What is this type of voting called?

Accepted Answer

A)   Democratic
B)   Cumulative
C)   Straight
D)   Deferred
E)   ProxyF) A) and B)
G) B) and D)

Question 14

Roy's Welding common stock sells for $58.49 a share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?

Accepted Answer

A)   $6.60
B)   $5.86
C)   $6.52
D)   $6.98
E)   $5.64F) B) and C)
G) C) and E)

Question 15

Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

Accepted Answer

A)   $27.42
B)   $27.09
C)   $26.08
D)   $26.42
E)   $28.13F) B) and C)
G) A) and D)

Question 16

Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, $4.10, and $4.25 over the next three years, respectively. Beginning four years from now, the dividend is expected to increase by 3.25 percent annually. What is one share of this stock worth today at a discount rate of 12.5 percent?

Accepted Answer

A)   $42.92
B)   $43.40
C)   $45.12
D)   $45.88
E)   $46.50F) A) and B)
G) A) and C)

Question 17

A decrease in which of the following will increase the current value of a stock according to the dividend growth model?

Accepted Answer

A)   Dividend amount
B)   Number of future dividends, provided the total number of dividends is less than infinite
C)   Dividend growth rate
D)   Discount rate
E)   Both the discount rate and the dividend growth rateF) A) and B)
G) B) and C)

Question 18

A forward PE is based on:

Accepted Answer

A)   the last four quarterly dividend payments.
B)   the last dividend payment multiplied by 2.
C)   historical earnings.
D)   estimated future earnings.
E)   industry averages.F) C) and D)
G) A) and D)

Question 19

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Accepted Answer

A)   floor trader.
B)   exchange customer.
C)   specialist.
D)   floor broker.
E)   market maker.F) C) and E)
G) A) and E)

Question 20

You want to be on the board of directors of Uptown Communications. Since you are the only shareholder who will vote for you, you will need to own more than half of the outstanding shares of stock if you are to be elected to the board. What is the type of voting called that requires this level of stock ownership to be successfully elected?

Accepted Answer

A)   Democratic
B)   Cumulative
C)   Straight
D)   Deferred
E)   ProxyF) A) and C)
G) B) and C)

Exam 8: Stock Valuation

Correct Answer
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A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Correct Answer
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Which one of following is the rate at which a stock's price is expected to appreciate?

Correct Answer
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Correct Answer
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Who can access Level 3 of NASDAQ's information?

Correct Answer
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An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Correct Answer
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Hardy Lumber has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?

Correct Answer
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Correct Answer
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Correct Answer
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The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock?

Correct Answer
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Correct Answer
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Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

Correct Answer
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A decrease in which of the following will increase the current value of a stock according to the dividend growth model?

Correct Answer
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Hi-Tek is a young start-up company that is currently retaining all of its earnings. The company plans to pay a $2 per share dividend in Year 7 and increase that dividend by 2.2 percent per year thereafter. What is the current share price if the required return is 16 percent?

Correct Answer
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Correct Answer
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Roy's Welding common stock sells for $58.49 a share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?

Correct Answer
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An agent who maintains an inventory from which he or she buys and sells securities is called a:

Correct Answer
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A forward PE is based on:

Correct Answer
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Which one of the following statements applies to NASDAQ?

Correct Answer
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The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. What is the market rate of return if the stock is currently selling for $49.10 a share?

Correct Answer
verified

Exam 8: Stock Valuation

Correct AnswerverifiedShow Answer

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Correct AnswerverifiedShow Answer

Which one of following is the rate at which a stock's price is expected to appreciate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Who can access Level 3 of NASDAQ's information?

Correct AnswerverifiedShow Answer

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a:

Correct AnswerverifiedShow Answer

Hardy Lumber has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The common stock of Dayton Repair sells for $47.92 a share. The stock is expected to pay $2.28 per share next year when the annual dividend is distributed. The company increases its dividends by 1.65 percent annually. What is the market rate of return on this stock?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

Correct AnswerverifiedShow Answer

A decrease in which of the following will increase the current value of a stock according to the dividend growth model?

Correct AnswerverifiedShow Answer

Hi-Tek is a young start-up company that is currently retaining all of its earnings. The company plans to pay a $2 per share dividend in Year 7 and increase that dividend by 2.2 percent per year thereafter. What is the current share price if the required return is 16 percent?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Roy's Welding common stock sells for $58.49 a share and pays an annual dividend that increases by 1.3 percent annually. The market rate of return on this stock is 12.6 percent. What is the amount of the last dividend paid?

Correct AnswerverifiedShow Answer

An agent who maintains an inventory from which he or she buys and sells securities is called a:

Correct AnswerverifiedShow Answer

A forward PE is based on:

Correct AnswerverifiedShow Answer

Which one of the following statements applies to NASDAQ?

Correct AnswerverifiedShow Answer

The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. What is the market rate of return if the stock is currently selling for $49.10 a share?

Correct AnswerverifiedShow Answer

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