finance chapter 7
If the growth rate (g) is zero, the capital gains yield is Blank______.
0/zero
If there are nine directors to be elected, what is the least number of shares you will need to guarantee a seat on the board under cumulative voting?
10 percent of the stock plus 1 share.
When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows:
one vote per share held
The fundamental business of the New York Stock Exchange is to attract Blank______.
order flow
New York Stock Exchange Designated Market Makers (DMMs) were formerly called Blank______.
specialists
Under a __________ voting mechanism, the minimum number of votes required to acquire a seat on a board is ________ % PLUS ___________ .
straight ; 50 ; 1 share
Earnings over the coming year are expected to be $3 and a benchmark PE of 15 applies to earnings over the previous year. The Blank______, or forecast, price over the coming year is $45.
target
The price of a share of common stock is equal to the present value of all ________ future dividends.
expected
True or false: A PE ratio that is based on estimated future earnings is called a regressive PE ratio.
false
True or false: All classes of stock issued by a firm must have equal voting rights.
false
True or false: Daily stock prices can only be found by looking up the stock in newspapers.
false
Electronic communication networks increase ________ and _________ in a market.
liquidity; competition
Payments to shareholders that represent a return on the capital contributed to the corporation are referred to as ______________.
dividends
Which one of the following is true about dividend growth patterns?
dividends may grow at a constant rate
A PE ratio that is based on estimated future earnings is known as a Blank______ PE ratio.
forward
The Blank______ can be interpreted as the capital gains yield.
growth rate
The value of a firm is derived using the firm's Blank______ rate and its Blank______ rate.
growth; discount
"Inside quotes" represent the Blank______ and the Blank______.
highest bid price; lowest ask price
Stock price reporting has increasingly moved from traditional print media to the Blank______ in recent years.
internet
Which type of voting procedure provides "institutional memory"?
staggered
Institutional memory can be enhanced by Blank______.
staggering board electrons
If you hold 50 shares of a particular corporation's common stock and there are 5 directors to be elected, how many votes will you be allowed to cast under CUMULATIVE voting?
250 -> 50 shares x 5 positions
If there are nine directors that need to be elected, how many shares do you need to own in order to guarantee a seat on the board under STRAIGHT voting?
50 percent of the stock + 1 share
R = Blank______.
D1/P0 + g
Someone who maintains an inventory of stocks and buys and sells those stocks is known as a Blank______.
Dealer
The two most important stock markets in the United States are the New York Stock Exchange and Blank______.
NASDAQ
Which of the following defines the primary market? Multiple choice question. The primary market is where stocks are issued for the first time. Primary markets are markets that are regulated by the Fed. The primary market is where stocks trade once they have been issued. Primary markets are markets for basic goods and services.
The primary market is where stocks are issued for the first time.
If unpaid preferred dividends must be "caught up" before any common dividends can be paid, they are called Blank______ dividends.
cumulative
Identify the two types of preferred dividends:
cumulative and noncumulative
All else constant, the dividend yield will increase if the stock price Blank______.
decreases
Which of the following represents the valuation of stock using a zero growth model?
dividend/discount rate= D/R
The constant growth model assumes that __________
dividends change at a constant rate
If a company's growth for Years 1 through 3 is 20 percent but stabilizes at 5 percent beginning in Year 4, its growth pattern would be described as Blank______.
nonconstant
This type of growth describes a company that grows quickly at first, then slower in future years.
nonconstant
______ refers to the stream of customer orders to buy and sell stocks.
order flow
Initial public offerings of stock occur in the Blank______ market.
primary
A written authorization for one shareholder to vote the stock of another shareholder is called a(n) Blank______.
proxy
Using a benchmark PE ratio against current earnings yields a forecasted price called a Blank______ price.
target
What right does a proxy give to a shareholder?
the right to vote on behalf of another shareholder
True or false: Total return is calculated by adding the dividend yield and the capital gains yield
true
True or false: Total return is calculated by adding the dividend yield and the capital gains yield.
true
A website that allows investors to trade directly with one another is called Blank______.
ECN
True or false: Common stock has a set maturity.
FALSE: common stock has no maturity
True or false: For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed
false
What is the formula for the present value of a growing perpetuity, where C1 is the net cash flow, R is the required return, and g is the growth rate?
PV = c1 / (r - g)
The dividend yield is determined by dividing the expected dividend (D1) by:
The dividend yield is determined by dividing the expected dividend (D1) by:
