Question 1

KIT Kars stock currently sells for $54.10 per share and has a fixed 2.5 percent dividend growth rate. What was the amount of the last dividend paid if the required rate of return is 11 percent?

Accepted Answer

A)   $4.49
B)   $3.57
C)   $5.30
D)   $4.15
E)   $4.36F) A) and E)
G) B) and D)

Question 2

What is the market called that facilitates the sale of shares between individual investors?

Accepted Answer

A)   Primary
B)   Proxy
C)   Secondary
D)   Inside
E)   InitialF) C) and D)
G) A) and D)

Question 3

A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share?

Accepted Answer

A)   $2.24
B)   $2.37
C)   $2.34
D)   $2.51
E)   $2.47F) A) and D)
G) B) and D)

Question 4

Nu-Tek is expanding rapidly. As a result, the company expects to pay annual dividends of $.62, .80, and $1.05 per share over the next three years, respectively. After that, the dividend is projected to increase by 4 percent annually. What is the current value of this stock if the required return is 16 percent?

Accepted Answer

A)   $7.63
B)   $9.67
C)   $10.46
D)   $6.58
E)   $8.49F) A) and B)
G) A) and C)

Question 5

Supplemental liquidity providers (SLPs)  trade securities on behalf of:

Accepted Answer

A)   their own accounts.
B)   the customers of a specific brokerage firm.
C)   designated market makers.
D)   any stock exchange member.
E)   any stock exchange customer.F) A) and B)
G) A) and C)

Question 6

Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Accepted Answer

A)   Non-dividend-paying stock
B)   Stock with a constant dividend
C)   Stock with irregular dividends
D)   Stock with a constant-growth dividend
E)   Stock with growing dividends for a limited period of timeF) All of the above
G) None of the above

Question 7

In November 2013, the NYSE was acquired by:

Accepted Answer

A)   the Amsterdam Exchange.
B)   the Intercontinental Exchange.
C)   the Securities Exchange Commission.
D)   Euronext.
E)   the American Stock Exchange.F) B) and E)
G) B) and D)

Question 8

Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?

Accepted Answer

A)   Proxy
B)   Aggregate
C)   Cumulative
D)   Straight
E)   CondensedF) D) and E)
G) None of the above

Question 9

Sugar Cookies will pay an annual dividend of $1.23 a share next year. The firm expects to increase this dividend by 8 percent per year the following four years and then decrease the dividend growth to 2 percent annually thereafter. Which one of the following is the correct computation of the dividend for Year 7?

Accepted Answer

A)   ($1.23)  ×(1.08 ×4)  ×(1.02 ×3) 
B)   ($1.23)  ×(1.08 ×4)  ×(1.02 ×2) 
C)   ($1.23)  ×(1.08) 4×(1.02) 2
D)   ($1.23)  ×(1.08) 4×(1.02) 3
E)   ($1.23) × (1.08) 4×(1.02) 4F) B) and E)
G) A) and B)

Question 10

The stream of customer instructions to buy and sell securities is called the:

Accepted Answer

A)   order flow.
B)   market maker.
C)   execution stream.
D)   operations flow.
E)   buyer's stream.F) A) and B)
G) A) and E)

Question 11

Which one of the following players on the floor of the NYSE is obligated to maintain a two-sided, orderly market for a limited number of securities?

Accepted Answer

A)   Designated market maker
B)   Floor sweeper
C)   Investment firms
D)   Supplemental liquidity provider
E)   Floor brokerF) B) and E)
G) A) and B)

Question 12

Breakfast Hut pays a constant annual dividend of $1.39 per share. How much are you willing to pay for one share if you require a rate of return of 14.6 percent?

Accepted Answer

A)   $14.72
B)   $9.52
C)   $2.52
D)   $1.59
E)   $11.87F) B) and D)
G) A) and E)

Question 13

The common stock of Up-Towne Movers sells for $33 a share, has a rate of return of 11.4 percent, and a dividend growth rate of 2 percent annually. What was the amount of the last annual dividend paid?

Accepted Answer

A)   $2.58
B)   $2.61
C)   $3.04
D)   $3.32
E)   $3.10F) A) and B)
G) None of the above

Question 14

JL Tools is a young start-up company. The company expects to pay its first dividend of $.20 a share in Year 6 with annual dividend increases of 1.5 percent thereafter. At a required return of 12 percent, what is the current share price?

Accepted Answer

A)   $1.77
B)   $1.08
C)   $1.23
D)   $1.90
E)   $2.13F) B) and E)
G) B) and C)

Question 15

The constant growth model can be used to value the stock of firms that have which type(s)  of dividends?

Accepted Answer

A)   Dividends that change by either a constant amount or a constant rate
B)   Dividends that change annually by a constant amount or that are zero
C)   Dividends that change annually by a constant amount
D)   Dividends that are either constant or change annually at a constant rate
E)   Only dividends that increase at a constant rateF) B) and D)
G) None of the above

Question 16

According to today's stock report, BL Lumber shares were up .14, the stock dividend yield is 2.6 percent, and the PE ratio is 9.8. What is the amount of the next annual dividend if yesterday's closing price was $35.14?

Accepted Answer

A)   $.918
B)   $.917
C)   $.914
D)   $.924
E)   $9.31F) B) and D)
G) C) and D)

Question 17

Triad common stock is selling for $27.80 a share and has a dividend yield of 2.8 percent. What is the dividend amount?

Accepted Answer

A)   $.31
B)   $.78
C)   $3.49
D)   $4.25
E)   $7.80F) A) and D)
G) C) and D)

Question 18

The price of a stock at Year 4 can be expressed as:

Accepted Answer

A)   D0/(R + g4) .
B)   D0 × (1 + R) 5.
C)   D1 × (1 + R) 5.
D)   D4/(R - g) .
E)   D5/(R - g) .F) None of the above
G) C) and D)

Question 19

The common stock of GT Enterprises is selling for $63.09 a share. The company pays a constant annual dividend and has a total return of 11.64 percent. What is the amount of the dividend?

Accepted Answer

A)   $5.02
B)   $4.04
C)   $7.34
D)   $7.70
E)   $6.81F) B) and E)
G) D) and E)

Question 20

Dixie Mart plans to pay dividends of $1.36, $1.15, $1.35, and $.40 at the end of the next four years, respectively. After that, the company will be sold and shareholders are expected to receive $82.40 per share in Year 6 when the sale should be finalized. If the required return is 11.4 percent, what is the current value of one share of this stock?

Accepted Answer

A)   $47.71
B)   $51.87
C)   $46.50
D)   $51.08
E)   $47.29F) A) and B)
G) All of the above

Exam 7: Equity Markets and Stock Valuation

Correct Answer
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The stream of customer instructions to buy and sell securities is called the:

Correct Answer
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In November 2013, the NYSE was acquired by:

Correct Answer
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Breakfast Hut pays a constant annual dividend of $1.39 per share. How much are you willing to pay for one share if you require a rate of return of 14.6 percent?

Correct Answer
verified

The constant growth model can be used to value the stock of firms that have which type(s) of dividends?

Correct Answer
verified

Correct Answer
verified

A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share?

Correct Answer
verified

Which one of the following players on the floor of the NYSE is obligated to maintain a two-sided, orderly market for a limited number of securities?

Correct Answer
verified

The common stock of Up-Towne Movers sells for $33 a share, has a rate of return of 11.4 percent, and a dividend growth rate of 2 percent annually. What was the amount of the last annual dividend paid?

Correct Answer
verified

The common stock of GT Enterprises is selling for $63.09 a share. The company pays a constant annual dividend and has a total return of 11.64 percent. What is the amount of the dividend?

Correct Answer
verified

According to today's stock report, BL Lumber shares were up .14, the stock dividend yield is 2.6 percent, and the PE ratio is 9.8. What is the amount of the next annual dividend if yesterday's closing price was $35.14?

Correct Answer
verified

What is the market called that facilitates the sale of shares between individual investors?

Correct Answer
verified

KIT Kars stock currently sells for $54.10 per share and has a fixed 2.5 percent dividend growth rate. What was the amount of the last dividend paid if the required rate of return is 11 percent?

Correct Answer
verified

Supplemental liquidity providers (SLPs) trade securities on behalf of:

Correct Answer
verified

JL Tools is a young start-up company. The company expects to pay its first dividend of $.20 a share in Year 6 with annual dividend increases of 1.5 percent thereafter. At a required return of 12 percent, what is the current share price?

Correct Answer
verified

Triad common stock is selling for $27.80 a share and has a dividend yield of 2.8 percent. What is the dividend amount?

Correct Answer
verified

Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?

Correct Answer
verified

Correct Answer
verified

The price of a stock at Year 4 can be expressed as:

Correct Answer
verified

Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Correct Answer
verified

Exam 7: Equity Markets and Stock Valuation

Correct AnswerverifiedShow Answer

The stream of customer instructions to buy and sell securities is called the:

Correct AnswerverifiedShow Answer

In November 2013, the NYSE was acquired by:

Correct AnswerverifiedShow Answer

Breakfast Hut pays a constant annual dividend of $1.39 per share. How much are you willing to pay for one share if you require a rate of return of 14.6 percent?

Correct AnswerverifiedShow Answer

The constant growth model can be used to value the stock of firms that have which type(s) of dividends?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A particular stock sells for $43.20 share and provides a total return of 11.6 percent. The total return is evenly divided between the capital gains yield and the dividend yield. Assuming a constant dividend growth rate, what is the current dividend per share?

Correct AnswerverifiedShow Answer

Which one of the following players on the floor of the NYSE is obligated to maintain a two-sided, orderly market for a limited number of securities?

Correct AnswerverifiedShow Answer

The common stock of Up-Towne Movers sells for $33 a share, has a rate of return of 11.4 percent, and a dividend growth rate of 2 percent annually. What was the amount of the last annual dividend paid?

Correct AnswerverifiedShow Answer

The common stock of GT Enterprises is selling for $63.09 a share. The company pays a constant annual dividend and has a total return of 11.64 percent. What is the amount of the dividend?

Correct AnswerverifiedShow Answer

According to today's stock report, BL Lumber shares were up .14, the stock dividend yield is 2.6 percent, and the PE ratio is 9.8. What is the amount of the next annual dividend if yesterday's closing price was $35.14?

Correct AnswerverifiedShow Answer

What is the market called that facilitates the sale of shares between individual investors?

Correct AnswerverifiedShow Answer

KIT Kars stock currently sells for $54.10 per share and has a fixed 2.5 percent dividend growth rate. What was the amount of the last dividend paid if the required rate of return is 11 percent?

Correct AnswerverifiedShow Answer

Supplemental liquidity providers (SLPs) trade securities on behalf of:

Correct AnswerverifiedShow Answer

JL Tools is a young start-up company. The company expects to pay its first dividend of $.20 a share in Year 6 with annual dividend increases of 1.5 percent thereafter. At a required return of 12 percent, what is the current share price?

Correct AnswerverifiedShow Answer

Triad common stock is selling for $27.80 a share and has a dividend yield of 2.8 percent. What is the dividend amount?

Correct AnswerverifiedShow Answer

Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The price of a stock at Year 4 can be expressed as:

Correct AnswerverifiedShow Answer

Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?

Correct AnswerverifiedShow Answer

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