Question 1

A securities market primarily comprised 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) electronic network 
A) auction 
B) private 
C) over-the-counter 
D) regional 
E) electronic network C

Question 2

Westover Winds just paid a dividend of $2.10 per share.The company will increase its dividend by 8 percent next year and will then reduce its dividend growth rate by 2 percentage points per year until it reaches the industry average of 2 percent dividend growth, after which the company will keep a constant growth rate forever.What is the price of this stock today given a required return of 11 percent?

Accepted Answer

A) $26.54 
B) $28.99 
C) $31.83 
D) $32.06 
E) $32.47 
A) $26.54 
B) $28.99 
C) $31.83 
D) $32.06 
E) $32.47 A

Question 3

You are the sole shareholder of a small corporation.Presently, you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets, if any, might be conducive to this sale?

Accepted Answer

A) NASDAQ 
B) OTCBB 
C) Pink Sheets 
D) NYSE 
A) NASDAQ 
B) OTCBB 
C) Pink Sheets 
D) NYSE C

Question 4

J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share.The company has determined that stocks with similar characteristics provide a 12.8 percent rate of return.What should the offer price be?

Accepted Answer

A) $37.26 
B) $41.38 
C) $48.20 
D) $54.69 
E) $62.60 
A) $37.26 
B) $41.38 
C) $48.20 
D) $54.69 
E) $62.60

Question 5

Which one of the following statements is correct concerning the two-stage dividend growth model?

Accepted Answer

A) G1 cannot be negative. 
B) Pt = Dt/R. 
C) G1 must be greater than G2. 
D) G1 can be greater than R. 
E) R must be less than G1 but greater than G2. 
A) G1 cannot be negative. 
B) Pt = Dt/R. 
C) G1 must be greater than G2. 
D) G1 can be greater than R. 
E) R must be less than G1 but greater than G2.

Question 6

Who owns the NYSE?

Accepted Answer

A) NYSE members 
B) specialists 
C) dealers 
D) floor brokers 
E) shareholders 
A) NYSE members 
B) specialists 
C) dealers 
D) floor brokers 
E) shareholders

Question 7

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

Accepted Answer

A) $24.38 
B) $25.68 
C) $26.51 
D) $27.02 
E) $27.37 
A) $24.38 
B) $25.68 
C) $26.51 
D) $27.02 
E) $27.37

Question 8

Show Boat Dinner Theatres has paid annual dividends of $0.32, $0.52, and $0.60 a share over the past three years, respectively.The company now predicts that it will maintain a constant dividend since its business has leveled off and sales are expected to remain relatively flat.Given the lack of future growth, you will only buy this stock if you can earn at least a 19 percent rate of return.What is the maximum amount you are willing to pay for one share of this stock today?

Accepted Answer

A) $2.43 
B) $3.16 
C) $4.43 
D) $4.69 
E) $4.82 
A) $2.43 
B) $3.16 
C) $4.43 
D) $4.69 
E) $4.82

Question 9

The stream of customer orders coming in to the NYSE trading floor is called the:

Accepted Answer

A) paper trail. 
B) trading volume. 
C) order flow. 
D) bid-ask spread. 
E) commission trail. 
A) paper trail. 
B) trading volume. 
C) order flow. 
D) bid-ask spread. 
E) commission trail.

Question 10

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. 
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.

Question 11

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Accepted Answer

A) electing the board of directors 
B) receiving a distribution of company profits 
C) voting either for or against a proposed merger or acquisition 
D) determining the amount of the dividend to be paid per share 
E) having first chance to purchase any new equity shares that may be offered 
A) electing the board of directors 
B) receiving a distribution of company profits 
C) voting either for or against a proposed merger or acquisition 
D) determining the amount of the dividend to be paid per share 
E) having first chance to purchase any new equity shares that may be offered

Question 12

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Accepted Answer

A) OTCDOT 
B) SuperDOT 
C) Instinet 
D) Internet 
E) Floornet 
A) OTCDOT 
B) SuperDOT 
C) Instinet 
D) Internet 
E) Floornet

Question 13

Which one of the following is an underlying assumption of the dividend growth model?

Accepted Answer

A) A stock has the same value to every investor. 
B) A stock's value is equal to the discounted present value of the future cash flows which it generates. 
C) A stock's value changes in direct relation to the required return. 
D) Stocks that pay the same annual dividend have equal market values. 
E) The dividend growth rate is inversely related to a stock's market price. 
A) A stock has the same value to every investor. 
B) A stock's value is equal to the discounted present value of the future cash flows which it generates. 
C) A stock's value changes in direct relation to the required return. 
D) Stocks that pay the same annual dividend have equal market values. 
E) The dividend growth rate is inversely related to a stock's market price.

Question 14

Douglass Gardens pays an annual dividend that is expected to increase by 3.6 percent per year.The stock commands a market rate of return of 12.6 percent and sells for $28.50 a share.What is the expected amount of the next dividend?

Accepted Answer

A) $2.03 
B) $2.57 
C) $3.17 
D) $2.20 
E) $2.28 
A) $2.03 
B) $2.57 
C) $3.17 
D) $2.20 
E) $2.28

Question 15

A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent, what is the amount of the next annual dividend?

Accepted Answer

A) $5.67 
B) $5.94 
C) $6.21 
D) $6.84 
E) $7.30 
A) $5.67 
B) $5.94 
C) $6.21 
D) $6.84 
E) $7.30

Question 16

Suppose you know a company's stock currently sells for $85 per share and the required return on the stock is 10 percent.You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield.What is the current dividend if it's the company's policy to always maintain a constant growth rate in its dividends?

Accepted Answer

A) $3.18 
B) $4.05 
C) $4.37 
D) $4.50 
E) $4.64 
A) $3.18 
B) $4.05 
C) $4.37 
D) $4.50 
E) $4.64

Question 17

Which of the following apply to a specialist who trades on the floor of the NYSE?
I.provides liquidity for an individual security
II.partially being replaced by SuperDOT
III.pays an annual fee for a trading license
IV.acts as a dealer

Accepted Answer

A) I and III only 
B) II and IV only 
C) I, III, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV 
A) I and III only 
B) II and IV only 
C) I, III, and IV only 
D) II, III, and IV only 
E) I, II, III, and IV

Question 18

The common stock of Auto Deliveries sells for $28.16 a share.The stock is expected to pay $1.35 per share next year when the annual dividend is distributed.The firm has established a pattern of increasing its dividends by 3 percent annually and expects to continue doing so.What is the market rate of return on this stock?

Accepted Answer

A) 7.42 percent 
B) 7.79 percent 
C) 19.67 percent 
D) 20.14 percent 
E) 20.86 percent 
A) 7.42 percent 
B) 7.79 percent 
C) 19.67 percent 
D) 20.14 percent 
E) 20.86 percent

Question 19

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 3 years, respectively.Beginning 4 years from now, the dividend is expected to increase by 3.25 percent annually.What is one share of this stock worth to you if you require a 12.5 percent rate of return on similar investments?

Accepted Answer

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

Question 20

Home Care Providers is paying an annual dividend of $1.10 every other year.The last dividend was paid two years ago.The firm will continue this policy until 3 more dividend payments have been paid.One year after the last dividend normal payment, the company plans to pay a final liquidating dividend of $40 per share.What is the current market value of this stock if the required return is 17 percent?

Accepted Answer

A) $18.92 
B) $20.74 
C) $23.16 
D) $24.14 
E) $24.53 
A) $18.92 
B) $20.74 
C) $23.16 
D) $24.14 
E) $24.53

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

You are the sole shareholder of a small corporation.Presently, you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets, if any, might be conducive to this sale?

J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share.The company has determined that stocks with similar characteristics provide a 12.8 percent rate of return.What should the offer price be?

Which one of the following statements is correct concerning the two-stage dividend growth model?

Who owns the NYSE?

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

The stream of customer orders coming in to the NYSE trading floor is called the:

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Which one of the following is an underlying assumption of the dividend growth model?

Douglass Gardens pays an annual dividend that is expected to increase by 3.6 percent per year.The stock commands a market rate of return of 12.6 percent and sells for $28.50 a share.What is the expected amount of the next dividend?

A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent, what is the amount of the next annual dividend?

Which of the following apply to a specialist who trades on the floor of the NYSE? I.provides liquidity for an individual security II.partially being replaced by SuperDOT III.pays an annual fee for a trading license IV.acts as a dealer

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Bond Valuation

Equity Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Recent Capital Market History

Return, Risk and the Security Market

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Financial Planning and Management

International Corporate Finance

Behavioural Finance

Financial Risk Management

Options and Corporate Finance

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Exam 8: Net Present Value and Other Investment Criteria

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

You are the sole shareholder of a small corporation.Presently, you wish to diversify your holdings and thus want to sell a portion of your shares but do not want to incur the costs associated with SEC filings.Which one of the following markets, if any, might be conducive to this sale?

J&J Foods wants to issue some 7 percent preferred stock that has a stated liquidating value of $100 a share.The company has determined that stocks with similar characteristics provide a 12.8 percent rate of return.What should the offer price be?

Which one of the following statements is correct concerning the two-stage dividend growth model?

Who owns the NYSE?

National Warehousing just announced it is increasing its annual dividend to $1.18 next year and establishing a policy whereby the dividend will increase by 3.25 percent annually thereafter.How much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent?

The stream of customer orders coming in to the NYSE trading floor is called the:

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists?

Which one of the following is an underlying assumption of the dividend growth model?

Douglass Gardens pays an annual dividend that is expected to increase by 3.6 percent per year.The stock commands a market rate of return of 12.6 percent and sells for $28.50 a share.What is the expected amount of the next dividend?

A stock pays a constant annual dividend and sells for $56.10 a share.If the market rate of return on this stock is 12.5 percent, what is the amount of the next annual dividend?

Which of the following apply to a specialist who trades on the floor of the NYSE? I.provides liquidity for an individual security II.partially being replaced by SuperDOT III.pays an annual fee for a trading license IV.acts as a dealer

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Bond Valuation

Equity Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Recent Capital Market History

Return, Risk and the Security Market

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Financial Planning and Management

International Corporate Finance

Behavioural Finance

Financial Risk Management

Options and Corporate Finance

Filters