Question 1

A weakness of the PE approach to valuing stock is that it is

Accepted Answer

A) difficult to estimate the constant growth rate of a firm's dividends. 
B) difficult to estimate the required return on equity. 
C) difficult to predict how much a firm will pay in dividends. 
D) based on industry averages rather than firm-specific factors. 
A) difficult to estimate the constant growth rate of a firm's dividends. 
B) difficult to estimate the required return on equity. 
C) difficult to predict how much a firm will pay in dividends. 
D) based on industry averages rather than firm-specific factors.

Question 2

The 2001 terrorist attacks and the Enron financial scandal caused anticipated dividend growth to ________, investors' required return on equity to ________, and stock prices to ________.

Accepted Answer

A) decrease; increase; decrease 
B) decrease; increase; increase 
C) increase; decrease; decrease 
D) increase; decrease; increase 
A) decrease; increase; decrease 
B) decrease; increase; increase 
C) increase; decrease; decrease 
D) increase; decrease; increase

Question 3

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 4

Stock values computed by valuation models may differ from actual market prices because it is difficult to

Accepted Answer

A) estimate future dividend growth rates. 
B) estimate the risk of a stock. 
C) forecast a stock's future dividends. 
D) all of the above are true. 
A) estimate future dividend growth rates. 
B) estimate the risk of a stock. 
C) forecast a stock's future dividends. 
D) all of the above are true.

Question 5

Exchange traded funds (ETFs)have which of the following features?

Accepted Answer

A) They are listed and traded as individual stocks on a stock exchange. 
B) They are indexed rather than actively managed. 
C) Their value is based on the underlying net asset value of the stocks held in the index basket. 
D) All of the above. 
A) They are listed and traded as individual stocks on a stock exchange. 
B) They are indexed rather than actively managed. 
C) Their value is based on the underlying net asset value of the stocks held in the index basket. 
D) All of the above.

Question 6

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 7

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 8

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.

A weakness of the PE approach to valuing stock is that it is

The 2001 terrorist attacks and the Enron financial scandal caused anticipated dividend growth to , investors' required return on equity to , and stock prices to .

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?

Stock values computed by valuation models may differ from actual market prices because it is difficult to

Exchange traded funds (ETFs)have which of the following features?

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

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

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

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

Filters

Exam 13: The Stock Market

A weakness of the PE approach to valuing stock is that it is

The 2001 terrorist attacks and the Enron financial scandal caused anticipated dividend growth to ________, investors' required return on equity to ________, and stock prices to ________.

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?

Stock values computed by valuation models may differ from actual market prices because it is difficult to

Exchange traded funds (ETFs)have which of the following features?

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

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

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

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

Filters

The 2001 terrorist attacks and the Enron financial scandal caused anticipated dividend growth to , investors' required return on equity to , and stock prices to .