FIN3403 Chpt 8

An agent who arranges a transaction between a buyer and a seller of equity securities is called a: A. Broker. B. Floor trader. C. Capitalist. D. Principal. E. Dealer.

A

An individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account is called a: A. Floor trader. B. Exchange customer. C. Specialist. D. Floor broker. E. Market maker.

A

A company has four open seats on its board of directors. There are seven candidates vying for these four positions. There will be a single election to determine the winners. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 400 of your votes for a single candidate. What is this type of voting called? A. Democratic. B. Cumulative. C. Straight. D. Deferred. E. Proxy.

B

The owner of a trading license for the NYSE is called a: A. Broker. B. Member. C. Agent. D. Specialist. E. Dealer.

B

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? A. Zero growth. B. Dividend growth. C. Capital pricing. D. Earnings capitalization. E. Discounted dividend.

B

Which one of the following applies to the dividend growth model? A. An individual stock has the same value to every investor. B. Even if the dividend amount and growth rate remain constant, the value of a stock can vary. C. Zero-growth stocks have no market value. D. Stocks that pay the same annual dividend will have equal market values. E. The dividend growth rate is inversely related to a stock's market price.

B

Which one of the following is the electronic system used by the NYSE for directly transmitting orders to specialists? A. DMM post. B. SuperDOT. C. DMM. D. SLP. E. OrderNET.

B

A floor broker on the NYSE does which one of the following? A. Supervises the commission brokers of a specific financial firm. B. Trades for his or her personal inventory. C. Executes orders on behalf of a commission broker. D. Maintains an inventory and assumes the role of a market maker. E. Is charged with maintaining a liquid, orderly market.

C

A market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a: A. Floor trader. B. Floor post. C. designated market maker. D. Floor broker. E. Commission broker.

C

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market? A. Auction. B. Private. C. Over-the-counter. D. Regional. E. Insider.

C

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. An increase in all stock values. B. All stock values to remain constant. C. A decrease in all stock values. D. Dividend-paying stocks to maintain a constant price while non-dividend paying stocks decrease in value. E. Dividend-paying stocks to increase in price while non-dividend paying stocks remain constant in value.

C

Dixie South currently pays an annual dividend of $1.46 a share and plans on increasing that amount by 2.75 percent annually. Northern Culture currently pays an annual dividend of $1.42 a share and plans on increasing its dividend by 3.1 percent annually. Given this information, you know for certain that the stock of Northern Culture has a higher ______ than the stock of Dixie South. A. Market price. B. Dividend yield. C. Capital gains yield. D. Total return. E. Real return.

C

NASDAQ has: A. An electronic network that transmits orders directly to the trading floor. B. Both floor and commission brokers. C. Three separate markets. D. A single designated market maker for each listed stock. E. Level 3 data available online for easy access by all investors.

C

The stream of customer orders coming in to the NYSE trading floor is called the: A. Paper trail. B. Trading volume. C. Order flow. D. Bid-ask spread. E. Commission trail.

C

What are the distributions of either cash or stock to shareholders by a corporation called? A. Coupon payments. B. Retained earnings. C. Dividends. D. Capital payments. E. Diluted profits.

C

Which one of the following is computed by dividing next year's annual dividend by the current stock price? A. Yield to maturity. B. Total yield. C. Dividend yield. D. Capital gains yield. E. Growth rate.

C

You want to be on the board of directors of Uptown Communications. Since you are the only shareholder who will vote for you, you will need to own more than half of the outstanding shares of stock if you are to be elected to the board. What is the type of voting called that requires this level of stock ownership to be successfully elected? A. Democratic. B. Cumulative. C. Straight. D. Deferred. E. Proxy.

C

Which one of the following statements is correct concerning the two-stage dividend growth model? A. g1 cannot be negative. B. Pt = Dt/ R. C. g1 must be greater than g2. D. g1 can be greater than R. E. R must be less than g1 but greater than g2.

D

National Trucking has paid an annual dividend of $1 per share on its common stock for the past 15 years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is: A. Basically worthless as it offers no growth potential. B. Equal in value to the present value of $1 paid one year from today. C. Priced the same as a $1 perpetuity. D. Valued at an assumed growth rate of 1 percent. E. Worth $1 a share in the current market.

D

Supernormal growth is a growth rate that: A. Is both positive and follows a year or more of negative growth. B. Exceeds a firm's previous year's rate of growth. C. Is generally constant for an infinite period of time. D. Is unsustainable over the long term. E. Applies to a single, abnormal year.

D

The counter area on the floor of the NYSE where a designated market maker operates is called a: A. Pit. B. Hot spot. C. Seat. D. Post. E. Platform.

D

The dividend growth model: A. Only values stocks at Time 0. B. Cannot be used to value constant dividend stocks. C. Can be used to value both dividend-paying and non-dividend-paying stocks. D. Requires the growth rate to be less than the required return. E. Assumes dividends increase at a decreasing rate.

D

The secondary market is best defined by which one of the following? A. Market in which subordinated shares are issued and resold. B. Market conducted solely by brokers. C. Market dominated by dealers. D. Market where outstanding shares of stock are resold. E. Market where warrants are offered and sold.

D

Which one of following is the rate at which a stock's price is expected to appreciate? A. Current yield. B. Total return C. Dividend yield. D. Capital gains yield. E. Coupon rate.

D

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n): A. Floor trader. B. Dealer. C. Specialist. D. Executor. E. Commission broker.

E

An agent who maintains an inventory from which he or she buys and sells securities is called a: A. Broker. B. Trader. C. Capitalist. D. Principal. E. Dealer.

E

Emst & Frank stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets? A. Private. B. Auction. C. Tertiary. D. Secondary. E. Primary.

E

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities? A. Senior bond. B. Debenture. C. Warrant. D. Common stock. E. Preferred stock.

E

Which one of the following statements is correct? A. Stocks can only be assigned one dividend growth rate. B. Preferred stocks generally have constant growth rates. C. Dividend growth rates must be either zero or positive. D. All stocks can be valued using the dividend discount models. E. Stocks can have negative growth rates.

E

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? A. Dual class. B. Cumulative. C. Non-cumulative. D. Preferred. E. Common.

E

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? A. Alternative voting. B. Cumulative voting. C. Straight voting. D. Indenture voting. E. Voting by proxy.

E