Securities not listed on one of the exchanges trades in the over-the-counter market. In this exchange, dealers "make a market" by

a.

doing neither of the above

b.

doing both of the above.

c.

buying stocks for inventory when investors want to sell.

d.

selling stocks from inventory when investors want to buy.

Which of the following is not an advantage of Electronic Communications Networks (ECNs)?

a.

All unfilled orders are available for review by ECN traders.

b.

Transactions costs are lower for ECN trades.

c.

ECNs work well for thinly traded stocks.

d.

Trades are made and confirmed faster.

A stock currently sells for $25 per share and pays $0.24 per year in dividends. What is an investor's valuation of this stock if s/he expects it to be selling for $30 in one year and requires a 15 percent return on equity investments?

a.

$30.24

b.

$26.09

c.

$26.30

d.

$27.74

In the one-period valuation model, a stock's value will be higher

a.

the higher its expected future price is.

b.

the higher the required return on investments in equity is.

c.

the lower its dividend is.

d.

all of the above.

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?

a.

$23

b.

$22

c.

$21

d.

$20