Question 1

In the one-period valuation model,a stock's value falls if the ________ rises.

Accepted Answer

A)  dividend 
B)  expected future price 
C)  required return on equity 
D)  current price 
A)  dividend 
B)  expected future price 
C)  required return on equity 
D)  current price C

Question 2

A share of common stock in a firm represents an ownership interest in that firm and allows stockholders to

Accepted Answer

A)  vote. 
B)  receive dividends. 
C)  receive interest payments. 
D)  only A and B of the above. 
A)  vote. 
B)  receive dividends. 
C)  receive interest payments. 
D)  only A and B of the above. D

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is not an objective of the Securities and Exchange Commission?

Accepted Answer

A)  Maintain integrity of the securities markets 
B)  Advise investors about which particular stocks are good buys 
C)  Require firms to provide specific information to investors 
D)  Regulate major participants in securities markets 
A)  Maintain integrity of the securities markets 
B)  Advise investors about which particular stocks are good buys 
C)  Require firms to provide specific information to investors 
D)  Regulate major participants in securities markets

Question 5

Which of the following is not a division of the S.E.C.?

Accepted Answer

A)  The Division of Fraud Investigation 
B)  The Division of Corporate Finance 
C)  The Division of Market Regulation 
D)  The Division of Investment Management 
E)  The Division of Enforcement 
A)  The Division of Fraud Investigation 
B)  The Division of Corporate Finance 
C)  The Division of Market Regulation 
D)  The Division of Investment Management 
E)  The Division of Enforcement

Question 6

According to the Gordon growth model,what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 15 percent?

Accepted Answer

A)  $20 
B)  $11 
C)  $22 
D)  $7.33 
E)  $4.40 
A)  $20 
B)  $11 
C)  $22 
D)  $7.33 
E)  $4.40

Question 7

A stock currently sells for $25 per share and pays $0.24 per year in dividends.What is an investor's valuation of this stock if she expects it to be selling for $30 in one year and requires a 15 percent return on equity investments?

Accepted Answer

A)  $30.24 
B)  $26.30 
C)  $26.09 
D)  $27.74 
A)  $30.24 
B)  $26.30 
C)  $26.09 
D)  $27.74

Question 8

More stock trading in the U.S.occurs in over-the-counter markets rather than on organized exchanges.

Accepted Answer

A) True 
 B)False

Question 9

All stocks pay dividends,as that is the only way an investor can profit from holding stock.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  $2.00. 
B)  $5.00. 
C)  $0.50. 
D)  $1.00. 
A)  $2.00. 
B)  $5.00. 
C)  $0.50. 
D)  $1.00.

Question 11

The Securities Acts of 1933 and 1934 established the S.E.C.to enforce which of the follow laws?

Accepted Answer

A)  Require firms to tell the public the truth about their businesses. 
B)  Require brokers, dealers, and exchanges to treat investors fairly. 
C)  To ensure that no investment ever loses money. 
D)  All of the above are laws the S.E.C. enforces. 
E)  A and B above are laws the S.E.C. enforces. 
A)  Require firms to tell the public the truth about their businesses. 
B)  Require brokers, dealers, and exchanges to treat investors fairly. 
C)  To ensure that no investment ever loses money. 
D)  All of the above are laws the S.E.C. enforces. 
E)  A and B above are laws the S.E.C. enforces.

Question 12

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 13

What are the advantages and disadvantages of exchange traded funds (ETFs)fro trading stocks?

Accepted Answer

Advantages:

1. Since they are traded on

Question 14

About half of new equity issues are preferred stock.

Accepted Answer

A) True 
 B)False

Question 15

About 75% of orders to buy or sell on the NYSE are executed using SuperDOT.

Accepted Answer

A) True 
 B)False

Question 16

A lower than average PE may mean that the market expects earnings to rise in the future.

Accepted Answer

A) True 
 B)False

Question 17

In the generalized dividend valuation model,a stock's value depends only on

Accepted Answer

A)  its future dividend payments and its future price. 
B)  its future dividend payments and the required return on equity. 
C)  its future price and the required return on investments on equity. 
D)  its future dividend payments. 
A)  its future dividend payments and its future price. 
B)  its future dividend payments and the required return on equity. 
C)  its future price and the required return on investments on equity. 
D)  its future dividend payments.

Question 18

What is the role of specialists on a stock exchange?

Accepted Answer

A specialist is an individual who is a m

Question 19

The riskiest capital market security is

Accepted Answer

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

Question 20

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. 
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.

Exam 13: The Stock Market

In the one-period valuation model,a stock's value falls if the ________ rises.

A share of common stock in a firm represents an ownership interest in that firm and allows stockholders to

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

Which of the following is not an objective of the Securities and Exchange Commission?

Which of the following is not a division of the S.E.C.?

According to the Gordon growth model,what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 15 percent?

A stock currently sells for $25 per share and pays $0.24 per year in dividends.What is an investor's valuation of this stock if she expects it to be selling for $30 in one year and requires a 15 percent return on equity investments?

More stock trading in the U.S.occurs in over-the-counter markets rather than on organized exchanges.

All stocks pay dividends,as that is the only way an investor can profit from holding stock.

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

The Securities Acts of 1933 and 1934 established the S.E.C.to enforce which of the follow laws?

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.

What are the advantages and disadvantages of exchange traded funds (ETFs)fro trading stocks?

About half of new equity issues are preferred stock.

About 75% of orders to buy or sell on the NYSE are executed using SuperDOT.

A lower than average PE may mean that the market expects earnings to rise in the future.

In the generalized dividend valuation model,a stock's value depends only on

What is the role of specialists on a stock exchange?

The riskiest capital market security is

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

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters