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Self Test Quiz



1

Most preferred stock has dividends that are cumulative.
A)True
B)False
2

For income tax purposes, preferred stock is more like debt than common stock.
A)True
B)False
3

If you use the constant growth model to value stock, you assume that P1 = P0 × (1 + g).
A)True
B)False
4

The effect of cumulative voting is to permit minority participation.
A)True
B)False
5

As illustrated using the dividend growth model, the total return on a share of common stock is comprised of a:
A)capital gains yield and a dividend growth rate.
B)capital gains growth rate and a dividend growth rate.
C)dividend yield and a required rate of return.
D)dividend yield and the expected price next year.
E)dividend yield and a capital gains yield.
6

Which one of the following terms is typically associated with both preferred stock and common stock?
A)proxy
B)voting rights
C)dividend yield
D)arrearage
E)cumulative voting
7

Which one of the following statements is true about the differences between debt and common stock?
A)Debt is ownership in a firm but equity is not.
B)Creditors have voting power while stockholders do not.
C)Periodic payments made to either class of security are tax deductible for the issuer.
D)Interest payments are promised while dividend payments are not.
E)Bondholders can also own equity, but shareholders can not own bonds.
8

A _____ is a NYSE member who is a dealer assigned as a market maker for a particular security.
A)broker
B)dealer
C)member
D)floor trader
E)specialist
9

A _____ maintains an inventory and stands ready to buy and sell at any time.
I. dealer
II. specialist
III. broker

A)I only
B)III only
C)I and II only
D)I and III only
E)II and III only
10

There is an election being held to fill two seats on the board of directors of a firm in which you hold stock. There is a total of 420 shares outstanding. If the election is conducted under cumulative voting and you own 120 shares, how many more shares must you buy to be assured of earning a seat on the board?
A)0
B)2
C)21
D)91
E)141





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