Fin 334 Ch 6
b
Stock which has been issued and subsequently reacquired by the issuing corporation is called A) letter stock. B) treasury stock. C) classified stock. D) book stock.
d
Stocks related to computers and the Internet are classified as A) blue-chip stocks. B) income stocks. C) cyclical stocks. D) tech stocks.
a
Stocks whose prices are expected to remain stable, or even prosper, when economic activity is slowing down are known as A) defensive stocks. B) cyclical stocks. C) reversible stocks. D) speculative stocks.
a
The Limberger Corporation declared a quarterly dividend of $0.10 per share. The ex-dividend date was July 15, the date of record was July 18, and the payment date was July 28. If you had owned 100 shares of the Limberger Corporation and sold them on July 15, then A) you would collect $10.00 in dividends, and the purchaser would not collect any dividends. B) the purchaser would collect $10.00 in dividends, and you would not collect any dividends. C) you would collect $5.00 in dividends, and the purchaser would collect $5.00 in dividends. D) neither you nor the purchaser would collect any money in dividends.
c
The U.S. stock market A) currently represents about 66% of the world's equity market. B) consistently outperforms the foreign markets once exchange rates are considered. C) is decreasing as a percentage of the world's equity market. D) lists over 25,000 stocks.
c
The common shares of the Owl Company have a book value of $10.80 and a market value of $14.30. The company pays $0.14 in dividends each quarter. What is the dividend yield? A) 1.0% B) 1.3% C) 3.9% D) 5.2%
a
The common stock investment strategy that is the most basic strategy and is popular with conservative, quality-conscious individuals looking for competitive returns over the long run is the A) buy-and-hold strategy. B) current income strategy. C) growth strategy. D) speculation and short-term trading strategy
a
The decision of how much money to pay out in dividends is made by the A) board of directors. B) company shareholders. C) chief executive officer. D) chief financial officer.
d
The extraordinary run up in stock prices during the late 1990's primarily affected A) energy stocks. B) retail stocks. C) pharmaceutical stocks. D) technology stocks.
a
The par or stated value of common stock is important for A) accounting purposes only. B) helping the investor determine the stock's intrinsic value. C) helping the board of directors determine the dividend payout. D) helping the market determine the trading price of the stock.
b
The stock listing for a company shows a P/E of 18, a dividend yield of 2.4% and a closing price of $23.76. What is the amount of dividends per share? A) $0.03 B) $0.57 C) $1.03 D) $1.32
b
The value that investors place on a stock is called its A) book value. B) investment value. C) liquidation value. D) par value.
b
The value that represents the amount of stockholders' equity in a firm is called the A) par value. B) book value. C) liquidation value. D) market value.
a
Total book-1,600,000 Market value-12,804,000 Common shares-600,000Which one of the following statements is correct based on the information provided? A) The market price is $21.34 per share. B) The investment value is $2.67 per share. C) The par value is $2.67 per share. D) The book value is $21.34 per share.
d
Treasury stock can be used to do which of the following? I. pay for an acquisition II. pay the company employees III. pay stock dividends IV. cover employee stock option plan contributions A) I and III only B) II and IV only C) III and IV only D) I, III and IV only
b
Typical characteristics of growth stocks include A) rapidly growing dividends. B) high rates of growth in operations and earnings. C) acquisitions of competing companies. D) strong performance even in market downturns.
d
When a corporation declares a stock split, it usually does so because A) the firm's retained earnings are excessive. B) there are too many shares of stock outstanding. C) investors sometimes require nontaxable returns. D) the stock price is too high.
d
Which category of stocks represents the highest level of risk? A) large-cap B) mid-cap C) baby blue D) small-cap
d
Which of the following are benefits related to stock ownership? I. ease of trading II. attractive inflation-adjusted rates of return III. guarantee of long-term positive returns IV. affordability A) I and II only B) II and IV only C) I and III only D) I, II and IV only
c
Which one of the following is a characteristic of blue chip stocks? A) guaranteed minimum annual dividend of $2 a share B) annual dividends of more than $5 per share C) long and stable dividend and earnings records D) relatively high risk exposure
b
) Dividend yield is calculated by dividing A) the market price of one share of stock by the annual dividend per share. B) the annual dividend per share by the market price of one share of stock. C) earnings per share by market price per share. D) annual dividend per share by earnings per share.
a
) If a corporation declares a 10% stock dividend, then A) the share price of the stock will most likely decline by about 9%. B) the share price of the stock will most likely increase by about 10%. C) the share price of the stock will most likely remain unchanged. D) each shareholder will get a 10% cash rebate off his or her next round lot purchase of the stock.
b
) If stocks earn an average rate of return of 12 %, their value doubles every A) 4 years. B) 6 years. C) 8 years. D) 12 years.
a
) In a rights offering, the A) existing stockholders are given the first opportunity to purchase new shares in proportion to their current ownership position. B) underwriter offers the investing public a certain number of shares at a certain price. C) total equity remains constant while the number of shares of common stock outstanding increases. D) amount of debt in the capital structure increases by the amount of the rights offering.
b
) Investors seeking current income that tends to increase over time should purchase A) cyclical stocks. B) income stocks. C) growth stocks. D) speculative stocks.
a
) Investors who are willing to trade in and out of stocks seeking quick profits would be particularly interested in A) blue chip stocks. B) growth stocks. C) cyclical stocks. D) income stocks.
c
) Over the long run, stocks have provided investors with annual returns of around A) 6% to 8%. B) 8% to 10%. C) 10% to 12%. D) 12% to 14%.
d
) Rob owns 300 shares of Blackwood common stock valued at $9 a share. Blackwood has declared a 3-for-1 stock split effective tomorrow. After the split, Rob will own A) 100 shares valued at about $27 a share. B) 100 shares valued at about $3 a share. C) 900 shares valued at about $27 a share. D) 900 shares valued at about $3 a share.
d
) Stock values declined sharply between A) 1994 and 1997. B) 1997 and 2000. C) 2003 and 2007. D) 2007 and 2008.
a
) The date on which an investor must be a registered shareholder of the firm in order to receive a dividend is called the A) date of record. B) ex-dividend date. C) payment date. D) purchase date.
c
) Tiffany owned 1000 shares of GIA stock which was selling for $1.50 per share when the company declared a 1 for 10 reverse split. After the split, Tiffany owned A) 10,000 shares worth approximately $1.50 per share. B) 10,000 shares worth approximately $0.15 per share. C) 100 shares worth approximately $15 per share. D) 100 shares worth approximately $1.50 per share.
b
) To take advantage of the opportunity to acquire additional shares of a company's stock without incurring any brokerage commissions, many investors participate in A) initial public offerings. B) dividend reinvestment plans. C) deferred equity securities. D) corporate trusts.
c
) Wall Street Journal Stock quotations include I. the highest and lowest price over the last 52 weeks II. dividend and dividend yield III. PE (price/earnings) ratio IV. the stock's beta A) I and III only B) II and IV only C) I, II and III only D) I, III and IV only
a
) When a company, working with an underwriter, offers the investing public a certain number of shares of its stock at a certain price, the company is making what is known as a A) public offering. B) rights offering. C) stock spin-off. D) treasury offering.
c
) Which of the following are characteristics of blue-chip stocks? I. solid balance sheets II. generous dividend yields III. immunity from bear markets IV. some growth potential A) III and IV only B) II and III only C) I, II and IV only D) II, III and IV only
d
Assume the Plum Corporation has two different issues of common stock. One issue carries voting rights, and the other issue does not. In this situation, Plum is said to have issued A) buy-back stock. B) treasury stock. C) OTC stock. D) classified stock.
c
A round lot consists of A) 1 share. B) 10 shares. C) 100 shares. D) 1,000 shares.
a
A&B Research Corp. specializes in the development of new products. These products oftentimes are complete failures in the marketplace. However, if a product is successful, it is normally a phenomenal success. The stock of A&B Research is classified as a A) speculative stock. B) cyclical stock. C) defensive stock. D) income stock.
b
ADRs A) represent ownership in unlisted domestic stocks. B) pay dividends in U.S. dollars. C) receive company dividends only in U.S. dollars. D) are subject to taxation only by the U.S. government
b
Aggressive stock management A) is the riskiest of all the investment strategies. B) involves active stock trading in the short-term in the quest for capital gains. C) concentrates on the long-term growth aspects of a security. D) concentrates on high dividend yielding stocks.
d
Amanda purchased stock in a German firm at a price per share of 35 euros when the US $/euro exchange rate was $1.40. After six months, Ann sold the stock for 37 euros when the US $/euro exchange rate was $1.45. The stock does not pay a dividend. What is Ann's rate of return on this investment? A) -9.5% B) -5.4% C) 5.7% D) 9.5%
c
An individual stock generally provides a A) dividend payment that ensures total protection from purchasing power risk. B) refuge from event risk. C) lower current income than that available from other types of investments. D) predictable annual rate of return.
c
An individual who invested $100,000 in average stocks early in the year 2000 would have approximately how much money at the end of 2008? A) $137,500 B) $96,400 C) $74,000 D) $37,500
c
Another term for the stated value or face value of a stock is its A) book value. B) liquidation value. C) par value. D) proxy value.
d
As a general rule, which one of the following statements concerning the various values of common stock is correct? A) Market values are usually below book values. B) Par values are usually above book values. C) Market values are usually below par values. D) Book values are usually below market values.
d
Which of the following are characteristics of small cap stocks? I. strong balance sheets II. annual revenues less than $250 million III. potential for high returns along with high risk IV. potentially dramatic changes in their earnings A) III and IV only B) II and III only C) I, III and IV only D) II, III and IV only
a
Because common shareholders are entitled to the profits that remain after all of a corporation's other obligations have been met, common shareholders are known as A) residual owners. B) temporary owners. C) debt owners. D) owners of last resort.
d
Which of the following factors should be considered when investing in foreign stocks? I. exchange rates II. differing accounting standards III. tax systems IV. ADRs A) I and II only B) I and III only C) I, II and III only D) I, II, III and IV
b
Which of the following periods provided particularly high returns to stock investors? A) February 1972-October 1974 B) August 1998-March 2000 C) September 2000-September 2002 D) October 2007-March 2009
d
Which of the following strategies appeal to investors who place primary emphasis on the storage of value aspects of an investment? I. buy and hold II. short-term trading III. quality long-term growth IV. consistent dividend record A) I and IV only B) I and III only C) I, II and III only D) I, III and IV only
d
Characteristics of established growth companies include all of the following EXCEPT A) high operating margins. B) steady earnings growth. C) adequate cash flow to service their debt. D) high dividend payout ratios.
a
Which of the following will tend to increase transaction costs? A) Buying or selling fewer than 100 shares at a time. B) Buying or selling shares through an on-line broker. C) Buying or selling more than 1000 shares in a single trade. D) Buying or selling at times when volume is high and the exchanges are busy.
d
Which one of the following investment strategies would NOT appeal to an investor who is most concerned with storage of value? A) buy-and-hold B) high income C) quality long-term growth D) speculation and short-term trading
b
Since each share of common stock represents ownership in a company, shares of common stock are often referred to as A) illiquid investments. B) equity securities. C) fixed-income securities. D) unit-cost securities.
a
Engines, Inc. declares a 2-for-5 stock split. The stock currently sells for $3 a share. A shareholder who owned 100 shares of stock prior to the split will now own A) 40 shares valued at about $7.50 a share. B) 40 shares valued at about $1.20 a share. C) 250 shares valued at about $7.50 a share. D) 250 shares valued at about $1.20 a share.
d
Factors considered in making a decision on a firm's dividend include the I. cash position of the firm. II. firm's growth prospects. III. the expectations of the shareholders. IV. restrictive covenants in loan agreements. A) II and IV only B) I, II and IV only C) I, II and III only D) I, II, III and IV
a
Gypsum Corp. pays out 25% of its earnings as dividends. Earnings per share are currently $1.32, book value per share is $16.80, and the market price per share is $22.44. What is the dividend yield? A) 1.5% B) 2.0% C) 5.9% D) 7.9%
d
Income stocks are well suited for retirees because A) dividend income is tax-free. B) the capital gains are predictable. C) dividend yields tend to exceed bond yields. D) dividends tend to increase over time.
c
One characteristic of mid-cap stocks is that they A) are generally new firms with high growth potential. B) tend to be highly volatile. C) are fairly good-sized companies that offer attractive return opportunities. D) are traded primarily through pink sheet bids.
b
Over the last 10 years, what percentage of the total return on typical stocks in the Dow Jones average has come from dividends? A) 0% to 1.0% B) 2% to 4% C) 8% to 10% D) More than 10%
b
Reinvested dividends A) are taxed when the shares purchased with the reinvested dividend are sold. B) are taxed at the time the dividend is paid. C) do not increase the value of an investor's holdings. D) are generally sold at a premium over the market price.
d
Since 2003, most dividends are taxed A) at a higher rate than capital gains. B) at a lower rate than capital gains. C) at the same rate as ordinary income. D) at the same rate as capital gains.
d
Which one of the following statements about common stock is correct? A) Each share of stock has a specified maturity date. B) Common stock gives stockholders first title to a share of the company's earnings, prior to other corporate obligations. C) Common stock typically provides higher levels of current income than do similar grade corporate bonds. D) Each share of common stock entitles the holder to an equal ownership position and an equal vote in the corporation.
a
Which one of the following statements about common stock is true? A) Common stock can provide attractive capital appreciation opportunities. B) Dividends generally provide the greatest rate of return on common stocks. C) Common stocks generally have a negative rate of return over a ten-year period. D) The DJIA is the best indicator of the overall performance of common stocks.
b
Which strategy applies to investors who fund long-term goals with high-quality stocks which they retain for the entire investment period? A) quality long-term growth B) buy and hold C) speculation D) current income
