1 High P/E ratios tend to indicate that a company is expected to _______, ceteris paribus

A grow quickly

B grow at the same speed as the average company

C grow slowly

D not grow

E None of the options are correct

2 _________ is equal to common shareholders'equity divided by common shares outstanding

A Liquidation value per share

B Book value per share

C Market value per share

D Tobin's Q

3 Stock A has a PE ratio double the PE ratio of stock B. This means that

A Stock A is underpriced and stock B is overpriced

B stock A is overrpriced and stock B is underpriced

C Stock A has more robust earning than stock B

D Stock B is riskier than stock A

E None of the above is nessarily true.

4 The price to book of stock MLS is less than 1. In fact it is 0.5. This means

A This indicates a strong buy signal for stock MLS

B This indicates that MLS return on equity is relatively high

C This indicates that a venture capitalist can buy the value at a market price, sell its assets and earn 100% return

D all of the above

E It is not over valued if its return on equity is very low.

5 Stock A has a PE = 10 and stock B has a PE=50. at the same day both stocks reported earning 20% lower than the consesus market estimates.

A The price of stock A is likely to fall

B the price of stock B is likely to fall

C Stock A will suffer worse decline than stock B

D Stock B will suffer worse decline than stock A

E Ab B and C are true.

6 Other things equal a stocks PE ratio

A is higher in a bear market

B is higher in a bull market

C has nothing to do with market

D is higher for growth stocks

E B and D

7 According to the data and analysis in the excel file "growth leverage div and PER"

A Two stocks that pay no dividend and experience the same growth are likely to have the same PE

B Two stocks that pay no dividend and experience the same growth are likely to have the same PE only if the have the same financial leverage

C Two stocks that pay no dividend and experience the same growth are likely to have the same PE only if the have the same price to book

D B and C

8 The PE ratio

A is a useful metric for discovering undervalued stocks

B is not useful for for discovering undervalued stocks

C may not be well defined

D is a useful metric for discovering undervalued stocks if adjusted for growth dividend yield and financial leverage

E C and D

9 NVDA has an expected 5-years growth of 13%, dividend yield of 0.22% andDebt to assets ratio of 18%. According to the data and analysis in the excel file "growth leverage div and PER", the fair PE ratio is

A 54.23

B 58.71

C 26.79

D 43.3

10 Adjusting the PE ratio by dividing the PE ratio by growth to derive the PEG metric

A works best for low growth stocks

B works best for very high growth stock

C for medium growth between 10% and 20%

D for all stocks

E works best for low growth and high growth stocks

20 A bond with a face value of $100 pays annual rate of 6% next year. A risky stock that pays no dividend is expected to sell at $106 one year from now. If the current price of the bond is $100, the stock

A is priced $100 too

B is priced more than $100

C is priced less than $100

D has an expected return higher than 6%

E is priced less than $100 and has an expected return higher than 6%

21 According to the CAPM the risk premium on a stock is

A determined by its variance

B determined by its beta

C determined by the market risk premium

D determined by all of the above

E is determined by its beta and its risk premium

The market risk premium is 8% and the risk free rate is 2%. GE has a beta of 1.2.

22 The expected return on GE is

A 0.116

B 0.092

C 0.14

D none of the above

23 If the expected of GE is $0.76 and the next year expected price of GE is 13.17%. The highest price you are willing to by GE is

A as low as possible

B $13.17

C $12.48

D $11.17

24 if the expected of GE is $0.76 and the next year expected price of GE is %13.17. The lowest price you are willing to sell GE is

A as low as possible

B $13.17

C $12.48

D $11.17

25 Assume that GE has zero growth and is willing to maintain a dividend payment of 0.76. The equilibrium price of GE is

A is the same as the answer in Question 4

B is the same as the answer in Question 3+C26

C $6.55

D $11.27

26 Assume that GE is expected to grow at a rate of 5% and its expected earning per share is0.76. The equilibrium price of GE is

A is higher that the answer in Question 5

B 11.52

C $9.72

D A and B

27 Assume that GE revised its earning outlook down by 20%. Assume that the market assumes that still believes that the long term growth is unchanged. Other things equal the price of GE

A will not change

B will drop 20%

C will drop to $9.12

D will drop 20% to $9.12

28 Assume that the market analysts lowered the long-term growth to 3%.The next earning per share is still 0.76.Other things equal the price of GE

A will rise by 2%

B will fall by 2%

C will drop to $8.37

D may drop or increase

29 If other thing are not equal, the change in Question 28 can be less drastic

A if the Fed lowers the interest rate

B If the fed increases the interest rate

C if currency risk increase

D if trade war risk increases

30 Assume that GE is expected to grow at a rate of 5% and its expected earning per share is0.76. The present value of the growth opportunity of GE

A can't be determined

B $4.96

C is equal to stock price

D $6.67