36) An investor should purchase a stock when 36) ______

A) the market price is greater than the justified price.

B) the capital gains rate is less than the required return and no dividends are paid.

C) the market price exceeds the intrinsic value.

D) the expected rate of return equals or exceeds the required return.

37) Lindor Inc.'s $100 par value preferred stock pays a dividend fixed at 8% of par. To earn 12% on

an investment in this stock, you need to purchase the shares at a per share price of37) ______

A) $9.60. B) $96.00. C) $150.00. D) $66.67.

38) Winifred, Inc. paid $1.64 as an annual dividend per share last year. The company is expected to increase their annual dividends by 3% each year. How much should you pay to purchase one share of this stock if you require a 9% rate of return on this investment?

38) ______

A) $27.33 B) $28.15 C) $18.22 D) $18.77

39) A company has an annual dividend growth rate of 5% and a retention rate of 40%. The company's dividend payout ratio is

39) ______

A) 60%. B) 40%. C) 35%. D) 45%.

40) MBA Inc. will pay a dividend for the first time at the end of 2013. It projects the following

dividend per share:

2013 $1.50

2014 $2.00

2015 $2.50

Beginning with 2016 dividends will grow at 4% per year. The required rate of return is 12%.

The intrinsic value of MBA shares is

40) ______

A) $38.50. B) $28.96. C) $27.85. D) $25.37.

41) An internal rate of return (IRR) is the discount rate that 41) ______

A) provides an investor with their required return.

B) is the minimal rate of return an investor will accept.

C) produces a present value of future benefits equal to the market price of a stock.

D) represents the minimal rate required to create a positive net present value.

42) EBITDA is an acronym for 42) ______

A) Earnings Before Interest, Taxes, Depreciation, and Amortization.

B) Earnings Based Information, Total Development Approach.

C) Ernst, Bostwick, Davenport, Innes Approach.

D) Earnings Before Interest, Taxes, Dividends, and Asset replacement.

43) An efficient market reflects 43) ______

A) all publicly known information related to past events and announced future events.

B) only historical information.

C) only the information related to events that have already occurred.

D) all information including predictions about future information.

44) The efficient market hypothesis rests on which of the following assumptions?

I. Information is widely available to all investors almost simultaneously.

II. Investors react quickly to new information.

III. Investors correctly interpret all available information.

IV. Events which affect the market occur randomly.

44) ______

A) I and II only B) I, II and III only

C) I, II, III and IV D) I, III and IV only

45) Followers of the random walk hypothesis believe that 45) ______

A) the price movements of stocks are unpredictable, and therefore security analysis will not

help to predict future market behavior.

B) security analysis is the best tool to utilize when investing in the stock market.

C) that traders can earn higher than normal returns by exploiting market anomalies such as the

small-firm effect.

D) support levels and resistance lines, when combined with basic chart formations, yield both

buy and sell signals.

46) Behavioral finance would explain many market anomalies to 46) ______

A) random price movements that only appear to have a rational explanation.

B) illegal manipulation of securities prices.

C) the influence of human emotions and biases on securities markets.

D) poorly understood aspects of market efficiency.