Question 1

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

Accepted Answer

A) privately held firms. 
B) firms that don't pay dividends. 
C) both A and B of the above. 
D) neither A nor B of the above. 
A) privately held firms. 
B) firms that don't pay dividends. 
C) both A and B of the above. 
D) neither A nor B of the above. C

Question 2

The most active stock exchange in the world is the

Accepted Answer

A) Nikkei Stock Exchange. 
B) London Stock Exchange. 
C) Shanghai Stock Exchange. 
D) New York Stock Exchange. 
A) Nikkei Stock Exchange. 
B) London Stock Exchange. 
C) Shanghai Stock Exchange. 
D) New York Stock Exchange. A

Question 3

How do corporate stocks differ from bonds?

Accepted Answer

not answered

Question 4

The Wall Street Journal reports on 23 different indexes in its "Markets Lineup" column.

Accepted Answer

A) True 
 B)False

Question 5

To list on the NYSE, a firm must

Accepted Answer

A) have earnings of at least $10 million per year. 
B) have at least $500 million in outstanding debt. 
C) have a total of $100 million in market value. 
D) meet all of the above requirements. 
E) meet A and C of the above requirements. 
A) have earnings of at least $10 million per year. 
B) have at least $500 million in outstanding debt. 
C) have a total of $100 million in market value. 
D) meet all of the above requirements. 
E) meet A and C of the above requirements.

Question 6

Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is

Accepted Answer

A) 20%. 
B) 15%. 
C) 10%. 
D) 5%. 
A) 20%. 
B) 15%. 
C) 10%. 
D) 5%.

Question 7

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.

Question 8

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

Accepted Answer

A) 15%. 
B) 10%. 
C) 5%. 
D) 2%. 
A) 15%. 
B) 10%. 
C) 5%. 
D) 2%.

Question 9

In 2010, the NYSE traded ________ shares on an average trading day.

Accepted Answer

A) 4 billion 
B) 7 billion 
C) 10 billion 
D) 12 billion 
A) 4 billion 
B) 7 billion 
C) 10 billion 
D) 12 billion

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not an element of the Gordon growth model of stock valuation?

Accepted Answer

A) the stock's most recent dividend paid 
B) the expected constant growth rate of dividends 
C) the required return on investments in equity 
D) the stock's expected future price 
A) the stock's most recent dividend paid 
B) the expected constant growth rate of dividends 
C) the required return on investments in equity 
D) the stock's expected future price

Question 12

Which of the following statements is false regarding Electronic Communications Networks (ECNs)?

Accepted Answer

A) Archipelago and Instinet are two examples of ECNs. 
B) Competition from ECNs has forced NASDAQ to cut its fees. 
C) Traders benefit from lower trading costs and faster service. 
D) ECNs allow institutional investors, but not individuals, to trade after hours. 
A) Archipelago and Instinet are two examples of ECNs. 
B) Competition from ECNs has forced NASDAQ to cut its fees. 
C) Traders benefit from lower trading costs and faster service. 
D) ECNs allow institutional investors, but not individuals, to trade after hours.

Question 13

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 14

(I)The market price of a security at a given time is the highest value any investor puts on the security. (II)Superior information about a security increases its value by reducing its risk.

Accepted Answer

A) (I)is true, (II)is false. 
B) (I)is false, (II)is true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)is false. 
B) (I)is false, (II)is true. 
C) Both are true. 
D) Both are false.

Question 15

Preferred stockholders hold a claim on assets that has priority over the claims of

Accepted Answer

A) both common stockholders and bondholders. 
B) neither common stockholders nor bondholders. 
C) common stockholders, but after that of bondholders. 
D) bondholders, but after that of common stockholders. 
A) both common stockholders and bondholders. 
B) neither common stockholders nor bondholders. 
C) common stockholders, but after that of bondholders. 
D) bondholders, but after that of common stockholders.

Question 16

Electronic Communications Networks apply technology to make organized exchanges more efficient and speedy.

Accepted Answer

A) True 
 B)False

Question 17

The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to

Accepted Answer

A) an increase in required returns on equity investments. 
B) a decline in growth prospects for U.S. companies. 
C) Both A and B are likely reasons. 
D) None of the above are correct. 
A) an increase in required returns on equity investments. 
B) a decline in growth prospects for U.S. companies. 
C) Both A and B are likely reasons. 
D) None of the above are correct.

Question 18

(I)A share of common stock in a firm represents an ownership interest in that firm. (II)A share of preferred stock is as much like a bond as it is like common stock.

Accepted Answer

A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false.

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

What are American Depository Receipts (ADRs)?

Accepted Answer

The answer of What are American Depository Receipts (ADRs)?...

Exam 13: The Stock Market

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

The most active stock exchange in the world is the

How do corporate stocks differ from bonds?

The Wall Street Journal reports on 23 different indexes in its "Markets Lineup" column.

To list on the NYSE, a firm must

Holding other things constant, a stock's value will be highest if the investor's required return on investments in equity is

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

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

In 2010, the NYSE traded ________ shares on an average trading day.

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

Which of the following is not an element of the Gordon growth model of stock valuation?

Which of the following statements is false regarding Electronic Communications Networks (ECNs)?

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.

(I)The market price of a security at a given time is the highest value any investor puts on the security. (II)Superior information about a security increases its value by reducing its risk.

Preferred stockholders hold a claim on assets that has priority over the claims of

Electronic Communications Networks apply technology to make organized exchanges more efficient and speedy.

The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to

(I)A share of common stock in a firm represents an ownership interest in that firm. (II)A share of preferred stock is as much like a bond as it is like common stock.

The riskiest capital market security is

What are American Depository Receipts (ADRs)?

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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

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