finance test 2

the common stock of the paper and printing co is selling for $22 a share and has a dividend yield of 4.5 percent. What is the dividend amount?

$.99

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 99.8 percent of par. Today, you sold this bond for 100.5 percent of par. What is your total dollar return on this investment?

$77

The return on which one of the following is used as the risk-free rate of return?

US Treasury bills

preferred stock I. generally has a fixed dividend II. generally has a dividend that increases annually. III. receives preference in bankruptcy over bonds. IV. receives preference in bankruptcy over common stock.

I and IV only generally has a fixed dividend and receives preference in bankruptcy over common stock.

Presto's just paid an annual dividend of $1.25 per share. The firm has a policy whereby it increases its dividend by 2 percent annually. Which one of the following is the correct computation for the capital gains yield if the current stock price is $21 a share?

.02

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

no new equity and a constant debt-equity ratio

Over the past six years, a stock had annual returns of 2 percent, 10 percent, 14 percent, 8 percent, -6 percent, and 8 percent, respectively. What is the standard deviation of these returns?

7.04 percent

The required return on Meadowland's stock is 11 percent and the dividend growth rate is 2.5 percent. The stock is currently selling for $23.50 a share. What is the dividend yield?

8.50 %

the common stock of bethel baked goods is valued at $8.76 a share. The company increases its dividend by annually and expects its next dividend to be $.65 per share. What is the required rate of return on this stock?

8.92 percent

Which one of the following statements is correct? A. the risk-free rate of return has a risk premium of 1.0 B. the reward for bearing risk is called the standard deviation C. risks and expected return are inversely related D. the higher the expected rate of return, the wider the distribution of returns E. risk premiums are inversely related to the standard deviation of returns

D. the higher the expected rate of return, the wider the distribution of returns

all of the following are characteristics of common stock except the: a. ability to vote for corporate directors b. ability to vote on key issues such as a merger c. priority over other equity in a bankruptcy proceeding. d. right to share proportionally in dividends paid to common shareholders. e. right to share proportionally in any residual value in bankruptcy proceeding

c. priority over other equity in a bankruptcy proceeding

Donavan Brothers, Inc. would like to increase rate of growth. Decreasing which one of the following help the firm achieve its goal?

dividend payout ratio

Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?

internal growth rate

Investors require a 3 percent return on risk-free investments. On a particular risky investment, investors require an excess return of 6 percent in addition to the risk free rate of 3 percent. What is this excess return called?

risk premium

The positive square root of the variance is called the:

standard deviation

Trio, Inc generates $1.50 in sales for every $1 the firm has invested in total assets. Which of the following ratios would reflect this relationship?

total asset turnover

The equity multiplier is equal to?

one plus the debt-equity ratio.

The Glass Ceiling paid an annual dividend of $1.64 per share last year and just announced that future dividend will increase by 1.3 percent annually. What is the amount of the expected dividend in Year 6?

$1.77

A firm has a return on equity of 22 percent. The total asset-turnover is 2.1 and the profit margin is 5 percent. The equity is 3,900. What is the amount of the net income?

$858

You are analyzing a company that has cash of 2,000, accounts receivable of $3,700, fixed assets of $10,900, accounts payable of $6,600, and inventory of $4,100. What is the quick ratio?

(CA-Inv.)/CL 12900-4100 / 10300 =.86 answer=0.86

A firm has net working capital of $3,800 and current assets of $11,700. What is the current ratio?

1.48

One year ago, you bought a stock for $36.48 a share. You received a dividend of $1.62 per share last month and sold the stock today for $40.18 a share. What is the capital gains yield on this investment? (40 x 18 x 36 x 48) / (36.48) = ?

10.14%

Preston's Market has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.6, and a profit margin of 2.4 percent. What is the equity multiplier?

2.60

Baker International stock returned 12.5 percent, -21.8 percent, 4.9 percent and 18.7 percent over the past four years, respectively. What is the arithmetic average return for this period?

3.58 percent

Anthony's appliances pays a constant annual dividend of $.35 per share. How much are you willing to pay for one if you require a 9 percent rate of return?

3.89

The security that represents the residual ownership of a firm and has no priority in bankruptcy is called:

common stock