 |
| 1 | |
A dividend becomes a liability of the corporation only if it is declared by the board of directors. |
| | A) | True |
| | B) | False |
|
|
|
| 2 | |
On the NYSE, generally there is only one market maker per security. |
| | A) | True |
| | B) | False |
|
|
|
| 3 | |
Which one of the following typically applies to preferred stock but NOT to common stock? |
| | A) | par value |
| | B) | dividend yield |
| | C) | cumulative dividends |
| | D) | voting rights |
| | E) | tax deductible dividends |
|
|
|
| 4 | |
Given no change in required returns, the value of a share of stock whose dividend is constant will: |
| | A) | increase over time at a rate of r percent. |
| | B) | decrease over time at a rate of r percent. |
| | C) | increase over time at a rate equal to the dividend growth rate minus 1. |
| | D) | decrease over time at a rate equal to the dividend growth rate minus 1. |
| | E) | remain unchanged. |
|
|
|
| 5 | |
You are attempting to value a stock in an industry where firms are generating exceptional dividend growth, but this growth is expected to slow to an equilibrium growth rate in about five years. Of the stock valuation models studied, the most appropriate for this situation is the: |
| | A) | perpetuity model. |
| | B) | constant growth model. |
| | C) | supernormal growth model. |
| | D) | perpetual growth model. |
| | E) | preferred stock model. |
|
|
|
| 6 | |
_____ can freeze out minority shareholders. |
| | A) | Straight voting |
| | B) | Cumulative dividends |
| | C) | Proxy voting |
| | D) | Preferred dividends |
| | E) | Multiple classes of stock |
|
|
|
| 7 | |
Which one of the following is typically an employee of a brokerage firm and carries out the wishes of the brokerage clients? |
| | A) | commission broker |
| | B) | specialist |
| | C) | floor broker |
| | D) | floor trader |
| | E) | market maker |
|
|
|
| 8 | |
The current price of ABC stock is $50.00. Dividends are expected to grow at 7 percent indefinitely and the most recent dividend was $1. What is the required rate of return on ABC's stock? |
| | A) | 9.00 percent |
| | B) | 9.14 percent |
| | C) | 9.33 percent |
| | D) | 10.65 percent |
| | E) | 11.29 percent |
|
|
|
| 9 | |
NuTop, Inc., has just issued a dividend of $1.60 per share. Subsequent dividends will remain at $1.60 indefinitely. Returns on the stock of comparable firms are currently 13.5 percent. What is the value of one share of NuTop stock? |
| | A) | $8.44 |
| | B) | $9.09 |
| | C) | $10.60 |
| | D) | $11.85 |
| | E) | $16.00 |
|
|
|
| 10 | |
Your firm is converting from cumulative voting to straight voting. You currently own the minimum number of shares needed to assure yourself a seat on the board under cumulative voting. How many more shares must you purchase in order to assure yourself a seat under straight voting? Assume there are a total of 500,000 shares outstanding and that three directors go up for election each time. |
| | A) | none |
| | B) | 25,000 |
| | C) | 125,000 |
| | D) | 250,000 |
| | E) | 250,001 |
|
|
.