stocks and bonds

30. Selling Stock with Commissions At your full-service brokerage firm, it costs $110 per stock trade. How much money do you receive after selling 100 shares of Time Warner, Inc. (TMX), which trades at $22.62? A. $2,152.00 B. $2,262.00 C. $2,372.00 D. $2,388.20

A. $2,152.00 ($22.62 per share times 100 shares) - $110 = $2,152.00

58. Dividend Growth Annual dividends of Target Corp (TGT) grew from $0.21 in 2000 to $0.52 in 2007. What was the annual growth rate? A. 13.83% B. 21.09% C. 49.52% D. 147.62%

A. 13.83% N = 7, PV = -0.21, FV = 0.52, PMT = 0, CPT I = 13.83%

8. The NASDAQ Composite includes A. all of the stocks listed on the NASDAQ Stock Exchange. B. 30 of the largest (market capitalization) and most active companies in the U.S. economy. C. 500 firms that are the largest in their respective economic sectors. D. 500 firms that are the largest as ranked by Fortune Magazine.

A. all of the stocks listed on the NASDAQ Stock Exchange

18. Value stocks usually have A. low P/E ratios and high growth rates. B. high P/E ratios and low growth rates. C. low P/E ratios and low growth rates. D. high P/E ratios and high growth rates.

A. low P/E ratios and high growth rates.

20. The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm's A. market capitalization. B. book value. C. market makers. D. constant growth model.

A. market capitalization.

32. Selling Stock with Commissions At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13? A. $16,546.00 B. $16,906.00 C. $17,026.00 D. $17,146.00

B. $16,906.00 ($85.13 per share times 200 shares) - $120 = $16,906.00

39. Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer, Inc.(PFE). The current bid and ask quotes are $27.22 and $27.25, respectively. You place a limit sell-order at $27.24. If the trade executes, how much money do you receive from the buyer? A. $2,722.00 B. $2,724.00 C. $2.725.00 D. $5,446.00

B. $2,724.00` $27.24 per share times 100 shares = $2,724.00

51. Value of Dividends and Future Price A firm is expected to pay a dividend of $1.50 next year and $1.65 the following year. Financial Analysts believe the stock will be at their target price of $35.00 in two years. Compute the value of this stock with a required return of 12 percent. A. $30.41 B. $30.56 C. $38.15 D. $75.00

B. $30.56 0 CF01.50 C01, 1 F0136.65 C02, 1 F0212 INPV = 30.56

6. The Dow Jones Industrial Average (DJIA) includes A. all of the stock listed on the New York Stock Exchange. B. 30 of the largest (market capitalization) and most active companies in the U.S. economy. C. 500 firms that are the largest in their respective economic sectors. D. 500 firms that are the largest as ranked by Fortune Magazine.

B. 30 of the largest (market capitalization) and most active companies in the U.S. economy.

59. Dividend Growth Annual dividends of Costco Wholesale (COST) grew from $0.20 in 2004 to $0.55 in 2007. What was the annual growth rate? A. 21.21% B. 40.10% C. 58.33% D. 63.63%

B. 40.10% N = 3, PV = -0.20, FV = 0.55, PMT = 0, CPT I = 40.10%

11. Investors sell stock at the A. dealer price. B. bid price. C. quoted ask price. D. broker price.

B. Bid price

9. This will only be executed if the order's price conditions are met. A. a trade B. a limit order C. an unlimited order D. a spread

B. a limit order

15. We can estimate a stock's value by A. using the book value of the total stockholder equity section. B. discounting the future dividends and future stock price appreciation. C. compounding the past dividends and past stock price appreciation. D. using the book value of the total assets divided by the number of shares outstanding.

B. discounting the future dividends and future stock price appreciation.

13. Stock valuation model dynamics make clear that lower discount rates lead to A. lower valuations. B. higher valuations. C. lower growth rates. D. higher growth rates.

B. higher valuations.

14. Stock valuation model dynamics make clear that higher growth rates lead to A. lower valuations. B. higher valuations. C. lower growth rates continuing. D. higher growth rates continuing.

B. higher valuations.

12. These are valued as a special zero-growth case of the constant growth rate model. A. common stock B. preferred stock C. future dividends D. future stock prices

B. perferred stocks

19. Dividend yield is defined as A. the last four quarters of dividend income expressed as a percentage of the par value of the stock. B. the last four quarters of dividend income expressed as a percentage of the current stock price. C. the last dividend paid expressed as a percentage of the current stock price. D. the next dividend to be paid expressed as a percentage of the current stock price.

B. the last four quarters of dividend income expressed as a percentage of the current stock price.

27. Buying Stock with Commission At your discount brokerage firm, it costs $8.50 per stock trade. How much money do you need to buy 200 shares of Apple (AAPL), which trades at $171.54? A. $32,608.00 B. $34,299.50 C. $34,316.50 D. $36,008.00

C. $34,316.50 ($171.54 per share times 200 shares) + $8.50 = $34,316.50

41. Selling Stock with a Limit Order You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer? A. $38,464.00 B. $38,468.00 C. $38,480.00 D. $38,496.00

C. $38,480.00 $96.20 per share times 400 shares = $38,480.00

37. Buying Stock with a Market Order You would like to buy shares of Nokia (NOK). The current bid and ask quotes are $20.13 and $20.15, respectively. You place a market buy-order for 300 shares that executes at these quoted prices. How much money did it cost to buy these shares? A. $6.00 B. $6,039.00 C. $6,045.00 D. $12,084.00

C. $6,045.00 $20.15 per share times 300 shares = $6,045.00

50. Value of Dividends and Future Price A firm is expected to pay a dividend of $2.00 next year and $2.14 the following year. Financial Analysts believe the stock will be at their target price of $75.00 in two years. Compute the value of this stock with a required return of 10 percent. A. $65.40 B. $66.67 C. $65.57 D. $79.14

C. $65.57 0 CF02.00 C01, 1 F0177.14 C02, 1 F0210 INPV = 65.57

26. Buying Stock with Commission At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13? A. $8,503.05 B. $8,503.00 C. $8,522.95 D. $9,508.00

C. $8,522.95 ($85.13 per share times 100 shares) + $9.95 = $8,522.95

34. Buying Stock with a Market Order You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares? A. $7.00 B. $9,617.00 C. $9,624.00 D. $19,241.00 $96.24 per share times 100 shares = $9,624.00

C. $9,624.00 $96.24 per share times 100 shares = $9,624.00

22. Stock Index Performance On November 26, 2007, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day? A. -.02% B. +.02% C. -1.83 D. +1.83%

C. -1.83% -237.44/[12743.40 - (-237.44)]

24. Stock Index Performance On November 26, 2007, The Standard & Poor's 500 Index closed at 1,407.20, which was down 33.48 that day. What was the return (in percent) of the stock market that day? A. -.02% B. +.02% C. -2.32% D. +2.32%

C. -2.32% -33.48/(1407.2 - (-33.48)) = 1440.68 in denominator

67. Expected Return The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting? A. 19.00% B. 19.02% C. 21.48% D. 22.74%

C. 21.48% [(0.90 * 1.19)/43.17] +.19 = .2148 = 21.48%

7. The Standard & Poor's 500 Index includes A. all of the stock listed on the New York Stock Exchange. B. 30 of the largest (market capitalization) and most active companies in the U.S. economy. C. 500 firms that are the largest in their respective economic sectors. D. 500 firms that are the largest as ranked by Fortune Magazine.

C. 500 firms that are the largest in their respective economic sectors.

3. When residual cash flows are high, stock values will be A. unchanged. B. low. C. high. D. unpredictable.

C. High

16. Many companies grow very fast at first, but slower future growth can be expected. Such companies are called A. Fortune 500 companies B. Blue Chip companies C. Variable Growth Rate firms D. Constant Growth Rate firms

C. Variable Growth Rate firms

21. This provides a useful theoretical basis because it illustrates the importance of dividends as a fundamental stock price determinant. A. limit order B. P/E ratio C. dividend discount model D. relative value

C. dividend discount model

10. Investors buy stock at the A. dealer price. B. bid price. C. quoted ask price. D. broker price.

C. quoted ask price

46. P/E Ratio and Stock Price International Business Machines (IBM) has earnings per share of $6.85 and a P/E ratio of 15.19. What is the stock price? A. $0.45 B. $2.22 C. $45.09 D. $104.05

D. $104.05 $6.85*15.19 = $104.05

61. Value a Constant Growth Stock Financial analysts forecast Pfizer, Inc. (PFE) growth for the future to be 9 percent. Their recent dividend was $1.15. What is the value of their stock when the required rate of return is 13.90 percent? A. $8.27 B. $15.99 C. $22.45 D. $25.58

D. $25.58 (1.15 * 1.09)/(.139 - .09) = $25.58

43. Value of a Preferred Stock If a preferred stock from Cytec Industries, Inc. (CYT) pays $2.00 in annual dividends, and the required return on the preferred stock is 6.5 percent, what's the value of the stock? A. $0.13 B. $0.31 C. $13.00 D. $30.77

D. $30.77 $2.00/6.5% = $30.77

42. Value of a Preferred Stock If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what's the value of the stock? A. $0.21 B. $0.43 C. $21.00 D. $42.86

D. $42.86 $3.00/7% = $42.86

60. Value a Constant Growth Stock Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 10 percent. Their recent dividend was $0.83. What is the value of their stock when the required rate of return is 12 percent? A. $0.4150 B. $0.4565 C. $41.50 D. $45.65

D. $45.65 (0.83 * 1.10)/(.12 - .10) = $45.65

48. P/E Ratio and Stock Price Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price? A. $0.22 B. $4.51 C. $22.16 D. $66.87

D. $66.87 $3.85 * 17.37 = $66.87

25. Stock Index Performance On November 27, 2007, The Standard & Poor's 500 Index closed at 1,428.23, which was up 21.01 that day. What was the return (in percent) of the stock market that day? A. -.01% B. +.01% C. -1.49% D. +1.49%

D. +1.49% 21.01/(1428.23 - 21.01) for a denominator of 1407.22

23. Stock Index Performance On November 27, 2007, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day? A. -.017% B. +.017% C. -1.69% D. +1.69

D. +1.69 215.04/(12958.44 - 215.04)

68. Expected Return Circuit City Stores (CC) recently paid a $.16 dividend. The dividend is expected to grow at a 23 percent rate. At the current stock price of $7.96, what is the return shareholders are expecting? A. 2.01% B. 23.00% C. 23.02% D. 25.47%

D. 25.47% [(0.16 * 1.23)/7.96] +.23 = .2547 = 25.47

2. As residual claimants, these investors claim any cash flows to the firm that remain after the firm pays all other claims. A. creditors B. bondholders C. preferred stockholders D. common stockholders

D. COmmon stockholders

5. These people oversee brokers and trades to ensure smooth trading in the stocks for which they are responsible. A. dealers B. brokers' trading posts C. investment bankers D. specialists and/or market makers

D. Specilists and or market markers

17. We often use the P/E ratio model with the firm's growth rate to estimate A. required rates of return. B. inflation. C. a stock's current price. D. a stock's future price.

D. a stock's future price.

1. These investors earn returns from receiving dividends and from stock price appreciation. A. bondholders B. stockholders C. investment bankers D. managers

Stockholders

4. Trading at physical exchanges like the New York Stock Exchange and the American Stock Exchange takes place A. at dealers' trading posts. B. at brokers' trading posts. C. at dealers' computers. D. at market markers.

b. at brokers'trading posts