301 CH 8

Which one of the following is an underlying assumption of the dividend growth model?

A stock's value is equal to the discounted present value of the future cash flows which it generates.

Which one of the following statements related to corporate dividends is correct?

Corporate shareholders may receive a tax break on a portion of their dividend income.

Which one of these statements related to preferred stock is correct?

Cumulative preferred shares are more valuable than comparable non-cumulative shares

The dividend growth model: I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point in time. III. can be used to value zero-growth stocks. IV. requires the growth rate to be less than the required return

I, II, III, and IV

Which of the following features do preferred shareholders and bondholders frequently have in common? I. lack of voting rights II. conversion option into common stock III. annuity payments IV. fixed liquidation value

I, II, III, and IV

You own 600 shares of a NASDAQ listed stock that you wish to sell. Which of the following are options available to you for this purpose? I. sell the shares to a dealer at the dealer's bid price II. sell directly to another individual via an ECN III. offer the shares yourself on NASDAQ via an ECN IV. have a broker offer the shares for sale on the NYSE

I, II, and III only

An increase in which of the following will increase the current value of a stock according to the dividend growth model? I. dividend amount II. number of future dividends, provided the current number is less than infinite III. discount rate IV. dividend growth rate

I, II, and IV only

Answer this question based on the dividend growth model. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect:

a decrease in all stock values

An ECN is best described as:

a website that allows individual investors to trade directly with one another.

An agent who arranges a transaction between a buyer and a seller of equity securities is called a

broker

Which one of following is the rate at which a stock's price is expected to appreciate? A. current yield

capital gains yield

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

common

An agent who maintains an inventory from which he or she buys and sells securities is called a:

dealer

Which one of the following rights is never directly granted to all shareholders of a publicly-held corporation?

determining the amount of the dividend to be paid per share

What is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?

dividend growth

Which one of the following is computed by dividing next year's annual dividend by the current stock price?

dividend yield

What are the distributions to shareholders by a corporation called?

dividends

The secondary market is best defined by which one of the following?

market where outstanding shares of stock are resold

The owner of one of the 1,366 trading licenses for the NYSE is called a:

member

A securities market primarily comprised of dealers who buy and sell for their own inventories is referred to which type of market

over-the-counter

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

preferred stock

Who owns the NYSE?

shareholders

You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called?

voting by proxy