Chapter 09 Question 1 Which one of the following statements is NOT true about secondary markets? a) In the United States, most secondary market transactions are done on one of the many stock exchanges. b) Firms listed on the NYSE tend to be, on average, larger in size and their shares trade more frequently than firms whose securities trade on NASDAQ. c) In terms of total volume of activity and total capitalization of the firms listed, the NASDAQ is the largest in the world and the NYSE is the second largest. d) In terms of the number of companies listed and shares traded on a daily basis, the NASDAQ is larger than the NYSE. Question 2 The least efficient of all the different types of secondary markets is the a) broker market. b) dealer market. c) auction market. d) direct search market. Question 3 Dealer markets are characterized by a) improved market efficiency because dealers provide continuous bid and ask prices for securities. b) all of these characterize dealer markets. c) no time-consuming search for a fair deal. d) a guarantee of order fulfillment because the dealer holds an inventory of securities Question 4 Which one of the following statements is NOT true about preferred stock? a) Preferred stock dividends are fixed financial amounts paid regularly by the firm just like bond coupon payments. b) Preferred stock represents ownership in the firm. c) Preferred stockholders take no precedence over common stockholders in the distribution of corporate assets in the event of liquidation. d) Preferred stockholders have no voting privileges unless the preferred stock is convertible into common stock. Question 5 Which one of the following statements is NOT true about the general dividend valuation model? a) It makes a specific assumption about when the stock is going to be sold in the future. b) The model calls for forecasting an infinite number of dividends for a stock. c) The model does not assume any specific pattern for dividend growth. d) All of these are true. Question 6 Direct search is the least efficient type of secondary market. a) True b) False Question 7 NASDAQ is the best-known example of a direct market. a) False b) True Question 8 Legally, common stockholders have unlimited liability. a) False b) True Question 9 For a company that has no growth, dividends stay constant over time. a) True b) False Question 10 Whenever the dividend growth rate exceeds the required rate of return, the constant-growth model provides invalid solutions. a) False b) True