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1、Chapter 07Equity Markets and Stock Valuation Multiple Choice Questions1.What is the name given to the model that computes the present value of a stock by dividing next years annual dividend amount by the difference between the discount rate and the rate of change in the annual dividend amount?A.Stoc
2、k pricing modelB.Equity pricing modelC.Capital gain modelD.Dividend growth modelE.Present value model2.The dividend yield is defined as:A.the current annual cash dividend divided by the current market price per share.B.the current annual cash dividend divided by the current book value per share.C.ne
3、xt years expected cash dividend divided by the current market price per share.D.next years expected cash dividend divided by the current book value per share.E.next years expected cash dividend divided by next years expected market price per share.3.The capital gains yield equals which one of the fo
4、llowing?A.Total yieldB.Current discount rateC.Market rate of returnD.Dividend yieldE.Dividend growth rate4.Which one of the following types of securities has no priority in a bankruptcy proceeding?A.Convertible bondB.Senior debtC.Common stockD.Preferred stockE.Straight bond5.Mary owns 100 shares of
5、stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are 3 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?A.ProxyB.AggregateC.CumulativeD.StraightE.Conden
6、sed6.There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _ voting.A.simultaneousB.straightC.proxyD.cumulativeE.sequential7.Kate could not attend the last shareholders meeting and thus
7、 she granted the authority to vote on her behalf to the managers of the firm. Which one of the following terms is used to describe the method by which Kates shares were voted?A.StraightB.CumulativeC.Consent-formD.ProxyE.In absentia8.Dividends are best defined as:A.cash payments to shareholders.B.cas
8、h payments to either bondholders or shareholders.C.cash or stock payments to shareholders.D.cash or stock payments to either bondholders or shareholders.E.distributions of stock to current shareholders.9.Which one of the following generally pays a fixed dividend, receives first priority in dividend
9、payment, and maintains the right to a dividend payment, even if that payment is deferred?A.Cumulative commonB.Noncumulative commonC.Noncumulative preferredD.Cumulative preferredE.Senior common10.Newly issued securities are sold to investors in which one of the following markets?A.ProxyB.Stated value
10、C.InsideD.SecondaryE.Primary11.What is the market called that allows shareholders to resell their shares to other investors?A.PrimaryB.ProxyC.SecondaryD.InsideE.Initial12.An agent who buys and sells securities from inventory is called a:A.floor trader.B.dealer.C.commission broker.D.broker.E.floor br
11、oker.13.A broker is an agent who:A.trades on the floor of an exchange for himself or herself.B.buys and sells from inventory.C.offers new securities for sale to dealers only.D.who is ready to buy or sell at any time.E.brings buyers and sellers together.14.Any person who owns a license to trade on th
12、e NYSE is called a:A.dealer.B.floor trader.C.specialist.D.member.E.proxy.15.A person who executes customer orders to buy and sell securities on the floor of the NYSE is called a:A.floor trader.B.specialist.C.runner.D.commission broker.E.market maker.16.A specialist is a(n):A.employee who executes or
13、ders to buy and sell for clients of his or her brokerage firm.B.individual who trades on the floor of an exchange for his or her personal account.C.NYSE member who functions as a dealer for a limited number of securities.D.broker who buys and sells securities from a market maker.E.trader who only de
14、als with primary offerings.17.An individual who executes buy and sell orders on the floor of an exchange for a fee is called a:A.floor broker.B.specialist.C.floor trader.D.proxy.E.flow specialist.18.The electronic system that transmits buy and sell orders directly to a specialist on the floor of the
15、 NYSE is called:A.NASDAQ.B.SuperDOT.C.TICKER.D.ECN.E.ORDFLOW.19.The owner of a trading license who trades on the floor of the NYSE for his or her personal account is called a(n):A.specialist.B.independent broker.C.floor trader.D.stand-alone agent.E.dealer.20.The stream of customer instructions to bu
16、y and sell securities is called the:A.order flow.B.market maker.C.execution stream.D.operations flow.E.buyers stream.21.The specific location on the floor of an exchange where a particular security is traded is called a:A.box office.B.figure 6.C.specialists post.D.trading booth.E.seat.22.Inside quot
17、es are defined as the:A.bid and asked prices presented by NYSE specialists.B.last bid and asked price offered prior to the market close.C.lowest asked and highest bid offers.D.daily opening bid and asked quotes.E.last traded bid and asked prices.23.Which one of the following is a web site that enabl
18、es Lester to sell his shares of ABC stock directly to Marti?A.SuperDOTB.POSTC.ECND.SEATE.eNET24.Which one of the following will increase the current value of a stock?A.Decrease in the dividend growth rateB.Increase in the required returnC.Increase in the market rate of returnD.Decrease in the expect
19、ed dividend for next yearE.Increase in the capital gains yield25.The price of a stock at year 4 can be expressed as:A.D0 / (R + G4).B.D0 (1 + R)5.C.D1 (1 + R)5.D.D4/(R-g).E.D5/(R-g).26.Delfinos expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year
20、5 if the firm increases its dividend by 2 percent annually?A.$1.50 (1.02)1B.$1.50 (1.02)2C.$1.50 (1.02)3D.$1.50 (1.02)4E.$1.50 (1.02)527.The required return on a stock is equal to which one of the following if the dividend on the stock decreases by 1 percent per year?A.(P0/D1)-gB.(D1/P0)/gC.Dividend
21、 yield + capital gains yieldD.Dividend yield - capital gains yieldE.Dividend yield capital gains yield28.Donuts Delite just paid an annual dividend of $1.10 a share. The firm expects to increase this dividend by 8 percent per year the following 3 years and then decrease the dividend growth to 2 perc
22、ent annually thereafter. Which one of the following is the correct computation of the dividend for year 7?A.($1.10) (1.08 3) (1.02 4)B.($1.10) (1.08 3) (1.02 3)C.($1.10) (1.08)3 (1.02)4D.($1.10) (1.08)3 (1.02)3E.($1.10) (1.08)3 (1.02)229.Aardvark, Inc. pays a constant annual dividend. At the end of
23、trading on Wednesday, the price of its stock was $28. At the end of trading on the following day, the stock price was $27. As a result of the decline in the stocks price, the dividend yield _ while the capital gains yield _.A.remained constant; remained constantB.increased; remained constantC.increa
24、sed; increasedD.decreased; remained constantE.decreased; decreased30.Which one of the following must equal zero if a firm pays a constant annual dividend?A.Dividend yieldB.Capital gains yieldC.Total returnD.Market value per shareE.Book value per share31.The dividend growth model can be used to value
25、 the stock of firms which pay which type of dividends? I. constant annual dividendII. annual dividend with a constant increasing rate of growthIII. annual dividend with a constant decreasing rate of growthIV. zero dividendA.I onlyB.II onlyC.II and III onlyD.I, II, and III onlyE.I, II, III, and IV32.
26、Kate owns a stock with a market price of $31 per share. This stock pays a constant annual dividend of $0.60 per share. If the price of the stock suddenly increases to $36 a share, you would expect the: I. dividend yield to increase.II. dividend yield to decrease.III. capital gains yield to increase.
27、IV. capital gains yield to decrease.A.I onlyB.II onlyC.III onlyD.I and III onlyE.II and IV only33.Computing the present value of a growing perpetuity is most similar to computing the current value of which one of the following?A.Non-dividend-paying stockB.Stock with a constant dividendC.Stock with i
28、rregular dividendsD.Stock with a constant growth dividendE.Stock with growing dividends for a limited period of time34.Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to control to ensure that his or her candidate is elected to the board given t
29、he fact that the firm uses straight voting? Assume one share equals one vote.A.20 percent of the shares plus one voteB.25 percent of the shares plus one voteC.1/3 of the shares plus one voteD.50 percent of the shares plus one voteE.51 percent of the shares plus one vote35.Gleason, Inc. elects its bo
30、ard of directors on a staggered basis using cumulative voting. This implies that:A.if there are two open seats, then the candidate with the highest number of votes and the candidate with the lowest number of votes will be selected.B.the candidates for the open seats are voted for in individual elect
31、ions.C.all open positions are filled with one round of voting, assuming there are no tie votes.D.shareholders can accumulate their votes over multiple years and cast all those votes in one election.E.the firms entire board of directors is elected annually in one combined election.36.Which one of the
32、 following statements is correct?A.From a legal perspective, preferred stock is a form of corporate equity.B.All classes of stock must have equal voting rights per share.C.Common shareholders elect the corporate directors while the preferred shareholders vote on mergers and acquisitions.D.Dividends
33、are tax-free income for individual investors.E.Shareholders prefer noncumulative dividends over cumulative dividends.37.Which one of the following statements is correct?A.Both preferred stock and corporate bonds can be callable.B.Both preferred stock and corporate bonds have a stated liquidation val
34、ue of $1,000 each.C.Interest payments to bondholders as well as dividend payments to preferred shareholders are tax deductible expenses for the issuing firm.D.Bondholders generally receive a fixed payment while preferred shareholders receive a variable payment.E.Preferred shareholders receive prefer
35、ential treatment over bondholders in a liquidation.38.If shareholders are granted a preemptive right they will:A.be given the choice of receiving dividends either in cash or in additional shares of stock.B.be paid dividends prior to the preferred shareholders during the preemptive period.C.be entitl
36、ed to two votes per share of stock.D.be able to choose the timing and amount of any future dividends.E.have priority in the purchase of any newly issued shares.39.On which one of the following dates do dividends become a liability of the issuer for accounting purposes?A.First day of the fiscal year
37、in which the dividend is expected to be paidB.Twelve months prior to the expected dividend payment dateC.On the declaration dateD.On the date of recordE.On the date of payment40.Dividends are which one of the following?A.Payable at the discretion of a firms presidentB.Treated as a tax-deductible exp
38、ense to the paying firmC.Paid out of aftertax profitsD.Paid to holders of record as of the declaration dateE.Only partially taxable to high-income individual shareholders41.You have agreed to pay a five percent commission to your best friend if he can locate a buyer for your car. This arrangement is
39、 most similar to the compensation arrangement for which one of these individuals who is involved with the stock market?A.SpecialistB.Floor traderC.Market makerD.Commission brokerE.Dealer42.To be a member of the NYSE, you must:A.be a primary dealer.B.buy a seat.C.own a trading license.D.be registered
40、 as a floor trader.E.be a specialist.43.Which one of the following players on the floor of the NYSE is obligated to maintain a fair, orderly market for a limited number of securities?A.SpecialistB.Floor traderC.$2 brokerD.Commission brokerE.Floor broker44.The NYSE:A.presently conducts all of its tra
41、ding through SuperDOT.B.is a dealer market.C.is in the business of attracting order flow.D.is solely a primary market.E.is based on a multiple market maker system.45.Which one of the following parties on the NYSE floor post bid and asked prices?A.Floor tradersB.SpecialistsC.Floor brokersD.Commission
42、 brokersE.Fee brokers46.Many of the smaller sell orders sent to the floor of the NYSE are:A.handled by the floor traders.B.purchased by the commission brokers.C.electronically transmitted to the specialists.D.executed on an ECN.E.executed in the primary market.47.If a trade is made in the crowd, the
43、 trade has occurred:A.between a broker and a specialist.B.between two brokers.C.electronically on NASDAQ.D.on SuperDOT.E.on an ECN.48.The more actively traded large companies that are listed on NASDAQ are traded in which one of the NASDAQ markets?A.NationalB.CapitalC.RegionalD.Global SelectE.Global4
44、9.Which one of the following features applies to NASDAQ but not the NYSE?A.Trading in the crowdB.Multiple market maker systemC.SuperDotD.Broker marketE.Physical trading floor50.Companies can list their stock on which one of the following without having to meet listing requirements or filing financia
45、l statements with the SEC?A.NASDAQ Capital MarketB.Over-the-Counter Bulletin BoardC.Pink sheetsD.NASDAQ Global MarketE.NYSE51.Keller Metals common stock is selling for $36 a share and has a dividend yield of 3.2 percent. What is the dividend amount?A.$0.32B.$1.15C.$3.49D.$11.25E.$11.5252.The Glass Ceiling paid an annual dividend of $2.20 per share last year. Management just announced that future dividends will increase by 2.8 percent annually. What is the amount of the expected dividend in year 5?A.$2.39B.$2.41C.$2.46D.$2.53E.$2.5853.The Pancake House pays a constant a