Questions in [New Questions]

1) Cumulative voting is a procedure in which a shareholder may cast all of his/her votes for a single member of the board of
directors.
[ ] True
[ ] False

2) Which one of the following terms is typically associated with both preferred stock and common stock?
[ ] proxy
[ ] voting rights
[ ] dividend yield
[ ] arrearage
[ ] cumulative voting

3) What would you pay for a stock that is expected to pay a $1.50 dividend in one year if the expected dividend growth rate is 3
percent and you require a 16 percent return on your investment?
[ ] $11.54
[ ] $12.33
[ ] $12.43
[ ] $13.14
[ ] $14.30

4) Which NYSE member is responsible for maintaining a fair, orderly market for the securities assigned to them?
[ ] commission broker
[ ] specialist
[ ] floor broker
[ ] floor trader
[ ] discount broker

5) You are attempting to value the shares of a new, high-technology firm in a developing industry. You would MOST likely:
[ ] use the zero growth dividend model.
[ ] use the nonconstant growth dividend model.
[ ] use the zero dividend model.
[ ] find the value by valuing the stock as a perpetuity.
[ ] not be able to value this company.

6) A maintains an inventory and stands ready to buy and sell at any time.
I. dealer
II. specialist
III. broker
[ ] I only
[ ] III only
[ ] I and II only
[ ] I and III only
[ ] II and III only

7) NASDAQ:
I. is actually two separate markets.
II. typically has multiple market makers for the same security.
III. permits electronic communications networks (ECNs) to utilize their trading system.
IV. essentially permits individuals to enter their own buy and sell orders for securities.
[ ] II only
[ ] III and IV only
[ ] I, II, and III only
[ ] II, III, and IV only
[ ] I, II, III, and IV

8) Which one of the following is a true statement regarding publicly traded stocks and bonds?
[ ] A share of preferred stock is generally easier to value than a share of common stock.
[ ] The price of a stock is greater than the present value of all future dividends.
[ ] The dividend growth model can be used to value stocks only if the dividend growth rate is constant from now into infinity.
[ ] A share of preferred stock represents an ownership interest in a corporation.
[ ] Preferred stock is more like common stock than a bond.

9) Biolabs, Inc. plans to retain and reinvest all of their earnings for the next 30 years. Investors believe that at the end of year 31 the
firm will pay a dividend of $12.00 per share. The dividend will increase at a 6 percent rate annually thereafter. Given a required
return of 15 percent, the stock should sell for:
[ ] $1.21.
[ ] $1.64.
[ ] $2.01.
[ ] $4.39.
[ ] $13.45.

10) Biogenetics, Inc. plans to retain and reinvest all of their earnings for the next 30 years. Investors believe that, beginning at the
end of year 31 the firm will begin to pay a dividend of $12.00 per share. The dividend will never change. Given a required return of
15 percent, what should the stock sell for today?
[ ] $1.21
[ ] $2.15
[ ] $8.15
[ ] $42.00
[ ] $80.00

11) Which NYSE member has become less important in recent years because of the SuperDOT system of trading?
[ ] commission broker
[ ] specialist
[ ] floor broker
[ ] floor trader
[ ] market maker

12) Bradley Broadcasting expects to pay dividends of $1.10, $1.21, and $1.331 in one, two, and three years, respectively. After
that, dividends are expected to grow at a constant rate of 4 percent forever. Stocks of similar risk yield 10 percent. The price of
Bradley Broadcasting stock today should be:
[ ] $18.48.
[ ] $19.12.
[ ] $20.33.
[ ] $21.46.
[ ] $22.56.

P0 =
1.1/1.1 +

1.21/(1.1^2) +

1.331/(1.1^3) +

[(1.331 x 1.04)/
(0.10 - 0.04)]/(1.1^3) =

1+
1+
1+
17.33333333 =

20.33333333
13) The partial excludability of dividend income from taxable income makes preferred stock less desirable to purchasers than it
might otherwise be.
[ ] True
[ ] False

14) If you use the constant growth model to value stock, you assume that P1 = P0 X (1 + g).
[ ] True
[ ] False

15) Dividends on preferred stock are tax deductible to the issuing firm.
[ ] True
[ ] False

16) A is an agent who arranges security transactions among investors.

[ ] broker
[ ] dealer
[ ] member
[ ] floor trader
[ ] specialist

17) The is measured by the number of shares that change hands each day on an exchange.
[ ] SuperDOT system
[ ] specialist's post
[ ] order flow
[ ] spread
[ ] price of a seat on the NYSE

18) can freeze out minority shareholders.

[ ] Straight voting
[ ] Cumulative dividends
[ ] Proxy voting
[ ] Preferred dividends
[ ] Multiple classes of stock

19) A commission broker wishing to execute a customer order to buy shares of stock must attempt to locate a trader to deal with
other than the specialist dealing in that stock because the:
[ ] commission broker must attempt to obtain the highest possible ask price. [
] specialist will trade only if there are other traders also trading in the stock. [ ]
specialist does not carry any shares of stock in inventory.
[ ] specialist's spread is typically very low compared to other brokers.
[ ] commission broker is responsible for getting the best possible price for the customer.
20) A broker and a dealer are the same thing.
[ ] True
[ ] False