QUESTION 2

1. NASDAQ is an example of a dealer market.
2. True
3. False

5 points

QUESTION 3

1. The New York Stock Exchange is an example of an auction market.
2. True
3. False

5 points

QUESTION 4

1. The least efficient of all the different types of secondary markets is the:
2. auction market.
3. direct search market.
4. dealer market.
5. broker market.

5 points

QUESTION 5

1. Direct search markets are characterized by:
2. complete price information and a high level of market efficiency.
3. extensive broker and dealer participation.
4. private placement transactions and sale of common stock of small private companies.
5. a high level of marketefficiency.

5 points

QUESTION 6

1. The most efficient of all the different types of secondary markets is the
2. auction market.
3. direct search market.
4. dealer market.
5. broker market.

5 points

QUESTION 7

1. Which of the following is not a widely known stock market index?
2. The Dow Jones Industrial Average
3. The OTQ Composite Index
4. The New York Stock Exchange Index
5. The S&P 500 Index

5 points

QUESTION 8

1. Which of the following statements about preferred stock is FALSE?
2. Preferred stock has a higher-priority claim on the firm's assets than the common stock.
3. Failure to pay dividends on preferred stocks will result in a default.
4. Preferred stock has a lower-priority claim on the firm's assets than the firm's creditors in the event of default.
5. Preferred stock typically pays a fixed dividend.

5 points

QUESTION 9

1. Preferred stock is sometimes treated like a debt security because:
2. legally preferred stock is a debt security.
3. preferred dividend payments are similar to bond interest payments and are fixed in nature regardless of the firm's earnings.
4. preferred dividends are deductible from taxable income just like interest payments on bonds.
5. preferred stock holders receive a residual value and not a stated value.

5 points

QUESTION 10

1. Which of the following statements is TRUE?
2. Preferred stockholders are considered to be the true owners of public corporations.
3. Dividends paid to preferred stockholders are usuallynot fixed.
4. Preferred stockholders do not typically have voting rights.
5. Preferred stock can never be converted to common stock.

5 points

QUESTION 11

1. Which of the following statements is TRUE about common stock?
2. Common stock is considered to have a fixed maturity.
3. Owners of common stock are guaranteed dividend payment by the firm.
4. Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy.
5. Common-stock holders have unlimited liability for the obligations of the corporation.

5 points

QUESTION 12

1. Applying the valuation procedure to common stocks is more difficult than applying it to bonds because:
2. the size and timing of the dividend cash flows are less certain than the coupon payments for bonds.
3. common stocks have no final maturity date.
4. unlike the rate of return, or yield, on bonds, the rate of return on common stock is not directly observable.
5. All of the above are true.

5 points

QUESTION 13

1. The three assumptions that cover most dividend growth patterns are
2. zero growth, contstant growth, no dividends
3. zero growth, random growth, no dividends
4. zero growth, constant growth, mixed (supernormal) growth
5. zero growth, random growth, infinite growth

5 points

QUESTION 14

1. Which of the following statements is TRUE?
2. In order for the constant growth dividend model to properly value a firm's common stock, R must be greater than g.
3. The growth rate in the constant growth dividend modelcannotbenegative.
4. In order for the constant growth dividend model to properly value a firm's common stock, g must be greater than R.
5. The constant growth dividend model can be used effectively to value the common shares of a mixed growth stock.

5 points

QUESTION 15

1. The constant growth dividend model would be useful to determine the value of all, but which of the following firms?
2. A firm whose earnings and dividends are declining at a steady rate.
3. A firm whose sales, profits, and dividends are growing at a rate of 5 percent.
4. A firm whose earnings and dividends are growing at a steady rate.
5. A firm whose expected sales,profits,and dividends are growingatanunpredictablerate.

5 points

QUESTION 16

1. Zephyr Electricals is a company with no growth.The last dividend was $4.50 and it expects no change in future dividends.What is the current price of the company's stock if the required rate of return is 9 percent?

5 points

QUESTION 17

1. Johnson Corporation JUST PAID a dividend of $4.63.The expected growth rate on dividends is 8 percent.What is the current price of this stock if the required rate of return is 10 percent?

5 points

QUESTION 18

1. Grant, Inc. is a fast growing company and its dividend is expected to grow at a rate of 10 percent for the next two years.It will then settle to a constant growth rate of 5 percent.If the last dividend was $6.20 and the required rate of return is 15 percent, what is the current price of the stock?

5 points

QUESTION 19

1. Ajax Company has issued perpetual preferred stock with an annual dividend of $4.80.What is the value of this preferred stock if the required rate of return is 8 percent?

5 points

QUESTION 20

1. A company is growing at a constant rate of 10 percent. Last week it paid a dividend of $2.83. If the required rate of return is 15 percent, what is the price of the stock five years from now?